What is the full form of HSN
HSN: Harmonized System of Nomenclature
HSN stands for Harmonized System of Nomenclature. It is a harmonized commodity description and coding system which is also known as the Harmonized System (HS) of tariff nomenclature. It is a multipurpose international product nomenclature developed by the World Customs Organization (WCO) to classify goods from all over the world in a systematic and logical manner. The WCO is responsible for the maintenance of this code. The HSN is governed by “The International Convention on the Harmonized Commodity Description and Coding System”.
The HS harmonizes the customs and trade procedures, and the non-documentary trade data interchange related to these procedures thus helps reduce costs of international trade. It is also used by governments, and private sector for internal taxes, trade policies, monitoring of controlled goods, freight tariffs, transport statistics, price monitoring, quota controls, economic research, and analysis. The HS is thus a global language and code for goods and a vital tool for international trade.
The HSN comprises around 5000 commodity groups, each of which is identified by a six-digit code which are arranged in a legal and logical structure and follows specific rules to achieve uniform classification. This system is followed by over 200 countries as a basis for their customer affairs and the collection of international trade statistics, to classify goods for taxation purpose, claiming benefits and more. More than 98 % of the merchandise in international trade is classified in terms of the HS.
In India, Goods and Service Tax (GST) is implemented on goods on the basis of their HSN number as the goods are classified on the basis of HSN number, and accordingly, Goods and Service Tax (GST) is calculated.
Understanding the digits of HSN Code:
The HSN structure has 21 sections which are divided into 99 Chapters of HSN code. The chapters are further divided into around 1,244 headings, which are further divided into 5,224 sub-headings. Each chapter can be assigned a two-digit HSN number. This two-digit HSN number is further subdivided into 4 digit HSN code. Based on these 4 digits HSN codes, the sub-classification is done as a 6 digit HSN code.