GSTN issues fresh clarification on the reporting of HSN codes in GST invoices

The GST Network (GSTN) has issued a new clarification on 12th April 2021 over the HSN code reporting. Specific HSN codes are not made available in the HSN master or not being accepted on e-invoice and e-way bill portals.

The release clarified that the notifications on the mandatory HSN code reporting being Central Tax Notification no. 78/2020 was the minimum requirement on the invoice. In other words, the taxpayers must declare at least four digits or six digits of the HSN code mandatorily depending upon the turnover category they fall into and the type of invoice. 

For instance, an invoice requires a six-digit HSN code that the taxpayer must report. Then the taxpayer can report either six digits or eight digits of the HSN code as may be available in the Tariff. On the other hand, where the taxpayer must report four digits of the HSN code in the invoice, he has three options. He can report four digits or six digits, or eight digits of the HSN code is available in the Tariff.

However, suppose the minimum stipulated four or six digits of the HSN code is not available in the tariff. In that case, it is not allowed to be mentioned in the invoice. Further, there is usually no mention of the specific description, unit, and GST rate in such cases.

It was noticed that some taxpayers are reporting a truncated HSN code containing only the first six digits instead of the total of eight digits. They are not present in the Tariff at a six-digit level. Further, these do not have a corresponding description given and leaves it invalid. Therefore, the system is rejecting such HSN code inputs. 

The GSTN further asked taxpayers to raise tickets for any queries or validation failures on the GST portal or e-invoice portal, or the e-way bill portal. They must use the GST self-service portal available at https://selfservice.gstsystem.in/. Upon visiting the portal, the aggrieved taxpayer must navigate the ‘Report Issue’ section and type ‘HSN’ in the search box known as ‘Type of Issue/Concern’. After that, he must select the applicable sub-type as ‘e-Invoice – IRP – HSN Code related’. 

The mandatory reporting of HSN codes was introduced while preparing the GSTR-1 return from 1st April 2021. As per the revised declaration, taxpayers with an annual aggregate turnover of more than Rs.5 crore must mandatorily declare six digits of the HSN code on all the tax invoices. The turnover to consider must be of the previous financial year. For instance, to report an invoice in FY 2021-22, one must consider the turnover of FY 2020-21.

Those taxpayers having an annual turnover of equal to or less than Rs.5 crore must report four digits of the HSN code on all the Business-to-Business (B2B) invoices. Simultaneously, this rule of minimum reporting is made optional on Business-to-Customers (B2C) invoices.

The Central Board of Indirect Taxes and Customs (CBIC) has already issued the corresponding notifications on 15th October 2020. The Central Tax notification number 78/2020 deals with the HSN code’s length to be reported from 1st April 2021. 

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in