Mandatory HSN Code in GSTR-1 & GSTR-1A: Phase-III

The Goods and Services Tax Network (GSTN) has announced the implementation of Phase-III for the mandatory mentioning of HSN (Harmonized System of Nomenclature) codes in GSTR-1 and GSTR-1A returns, starting from the return period of February 2025. This phase follows the successful completion of Phase-I and Phase-II, marking a significant step towards enhancing the accuracy and efficiency of GST returns. Read the more information about HSN below.

Key Changes in Phase-III

  1. HSN Code Selection:

    • The manual entry of HSN codes has been replaced with a dropdown menu, allowing taxpayers to select the correct HSN code from a predefined list. This change aims to reduce errors and ensure consistency in reporting.

  2. Bifurcation of Table-12:

    • Table-12 of GSTR-1 and GSTR-1A has been divided into two separate tabs: B2B (Business-to-Business) and B2C (Business-to-Consumer). This bifurcation facilitates the separate reporting of supplies made to businesses and consumers, enhancing clarity and compliance.

  3. Validation Mechanism:

    • A new validation mechanism has been introduced for both the B2B and B2C tabs of Table-12. This mechanism checks the values of supplies and the corresponding tax amounts. Initially, these validations will operate in warning mode, meaning that failing the validation will not prevent the filing of GSTR-1 and GSTR-1A. This approach allows taxpayers to familiarize themselves with the new system without facing immediate penalties.

Benefits of the New System

  • Accuracy: The dropdown selection for HSN codes minimizes the risk of incorrect entries, leading to more accurate tax reporting.
  • Clarity: The separation of B2B and B2C transactions provides clearer insights into different types of supplies, aiding in better compliance and analysis.
  • Ease of Use: The warning mode for validations ensures a smooth transition for taxpayers, allowing them to adapt to the new requirements without disruption.

Conclusion

The implementation of Phase-III for HSN code mentioning in GSTR-1 and GSTR-1A is a significant step towards improving the GST return filing process. By enhancing accuracy, clarity, and ease of use, this new system will benefit taxpayers and streamline compliance.

1) What is HSN Code in GST of India?

HSN (Harmonized System of Nomenclature) code is a standardized system developed by the World Customs Organization (WCO) for classifying goods worldwide. In the context of India’s GST (Goods and Services Tax), HSN codes are used to classify goods systematically, making it easier for the government to identify the type of goods being traded and apply the correct tax rates.

2) How to Find HSN?

To find the appropriate HSN code for your goods, you can:

  1. Consult the GST Rate and HSN Code Finder: The Indian government provides an official portal where you can search for HSN codes based on the description of your goods.
  2. Check the GST Rate Schedule: The GST rate schedule, available on the CBIC (Central Board of Indirect Taxes and Customs) website, lists HSN codes along with corresponding GST rates.
  3. Use Tax Software: Many GST compliance software, like TaxPower GST, have built-in features to help you find the correct HSN codes for your products.
  4. Refer to Industry Guidelines: Different industries may have specific guidelines or resources for determining HSN codes.

How TaxPower GST Software Handles HSN in Various Return Forms

TaxPower GST software efficiently manages HSN (Harmonized System of Nomenclature) codes across various GST return forms, ensuring accurate and compliant filing. Here’s how it handles HSN in different forms:

  1. GSTR-1: The software allows for easy input and validation of HSN codes for outward supplies. It provides a summary of HSN codes to ensure that all entries are accurate and complete before submission.
  2. Annual Reconciliation Statement: For annual reconciliation statements, TaxPower GST auto-populates HSN codes from previous returns, ensuring consistency and reducing manual entry errors. The software also provides validation checks to verify that HSN codes are correctly entered.
  3. Data Import and Export: The software supports importing and exporting data in various formats, including HSN codes, from and to GSTN Portal, accounting software, and other sources.
  4. HSN Summary and Validation: TaxPower GST provides a detailed HSN summary and validation feature, which helps businesses review and confirm the accuracy of HSN codes used in their returns.

By leveraging these features, TaxPower GST simplifies the process of managing HSN codes across different return forms, ensuring compliance and reducing the risk of errors.

Taxpower GST is here to help you navigate these changes efficiently.

Blog Ref: GSTN Government Site