What is a HSN Code ?

Mayur Rawte
What is a HSN Code ?

Import-export has been the thriving center for any nation or business. Ever since international trade and commerce has gone global, the world has seen a different class of freight forwarding. There are millions of products being shipped from one place to another. Thus, making one thing clear, the language of transportations and shipping is the same all across the world irrespective of the country or nation. And for this universal language to become transparent, there are specific codes handed out which speak this very same language regardless of international boundaries. Therefore, HSN codes are an integral part of freight forwarding in the 21st century. Therefore, to learn more about this code, let's dive deeper into the subject and learn about HSN code. Let's get started.

What is the HSN code?

HSN, or also known as Harmonic System of Nomenclature, was invented by the World Customs Organization (WCO). It was particularly bought into the bigger picture mainly to classify goods from all over the world systematically and logically irrespective of nation or country. The code is a six-digit that segregates well over 5000 products based on various classifications and is accepted on an international basis. The other reason as to why these codes are used is to identify the product or cargo and the origin of the same and implementing the required taxes based on its source. Needless to say, that knowing the shipment with which the product might be a part of is easily accessible by HSN code. Thus, each of the six-digit figures is classified into various sub-heading and segregated based on the different terminology of the cargo that is being shipped.

Ever since its application, HSN has been a great hit with well over 200 countries adopting its usage and making things transparent for countries and shippers or freight forwarders to track various details of a cargo. International trade and commerce have never been more straightforward ever since the implementation of the HSN code, which has reduced the complexity and difficulty of international trade.

Understanding HSN in India.

Now that we have understood the brief meaning of HSN from a global point of view, HSN in India is relatively the same but different in one way or the other. India has been using HSN system from 1986 under the Central Excise and Customs regime. India has its tax system known as GST or Goods & Service Tax. It's one tax covering all nomenclatures of transactions within the country. But the companies that use the HSN code need to follow as a 3-tiered system of HSN. Most of the essential bits and pieces of the code are given below.

•    HSN isn't for everyone, but only for these companies that have a turnover of more than 1.5 crore rupees.

•    Companies that have a turnover of over five crore rupees will have to follow or use 4-digit HSN code.

•    2-digit HSN code will be applicable for companies that have a turnover of more than 1.5 crore rupees and less than five crore rupees.  

•    An 8-digit HSN code will be mandatory for companies that are involved with the import-export side of things.

Therefore, it's safe to say that with HSN, the life of a freight forwarder using seaways for import-export has become simple and straightforward. With HSN code, everything has become transparent and life if a shipper has become relatively more comfortable.  


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