What an HSN code is
HSN stands for Harmonised System of Nomenclature. It's a numbering system that classifies goods for tax. Every product you sell has an HSN code, and that code decides its GST rate. Get the code right and the correct tax follows on its own. Get it wrong and every invoice for that product is off.
Why it matters for your GST
The HSN code is the link between your product and its tax slab. It's mandatory on your invoices and in your GST returns. Tax officers use it to check you've charged the right rate. It's not paperwork for its own sake. It's how the system knows a shirt is taxed differently from a laptop.
How many digits you need
The number of HSN digits you must show depends on your turnover. If your turnover in the last financial year was up to ₹5 crore, you show 4 digits. Above ₹5 crore, you show 6. More digits means a more specific classification. Use at least that many on every invoice that needs the code.
The HSN digit rule at a glance
| Turnover in the last financial year | Invoices to business buyers | Invoices to shoppers |
|---|---|---|
| Up to ₹5 crore | 4 digits | Optional |
| More than ₹5 crore | 6 digits | 6 digits |
Where the rule comes from
Rule 46 of the CGST Rules lists what goes on a tax invoice, and the HSN code is one of those fields. The same rule lets the tax board decide, by notification, how many digits each class of seller must show. It can also say which sellers may skip the code for a time. Notification 78/2020 used that power. It set the 4-digit and 6-digit split from 1 April 2021. When someone quotes you a different digit count, check it against that notification first.
Your turnover means last year's
The digit rule looks back, not at this year. It is based on your turnover in the preceding financial year. So if you cross ₹5 crore this year, you can keep showing 4 digits until the year ends on 31 March. From the next financial year, you move to 6. Put a reminder in your calendar for April. Then update the codes on all your products in one go, instead of one invoice at a time.
A worked example
Say your store sold ₹3.2 crore last year. You print 4-digit codes on invoices to business buyers. On orders from shoppers, you may leave the code off. This year you sell ₹5.4 crore. For the rest of this year, nothing changes. From next April, every invoice shows a 6-digit code, and the shopper option goes away. The extra two digits make each product's class more exact.
How to find your code
Start with the official GST HSN lookup, or a reliable rate finder. Search by the product name and read the description carefully - similar products can sit under different codes. When two codes look close, the exact wording of the description decides. If a product is unusual, confirm with a CA rather than guess.
Bills of supply need HSN too
Not every seller issues a tax invoice. If you sell only exempt goods, or you pay tax under the composition scheme, section 31 says you issue a bill of supply instead. Rule 49 lists what that bill must carry, and the HSN code is on the list. The digit rules from Rule 46 apply to it as well. So even a small seller outside the normal tax invoice still needs the right codes on file.
Which documents carry the code
| Document | Rule | HSN code needed? |
|---|---|---|
| Tax invoice | Rule 46 | Yes, with the digits for your turnover |
| Bill of supply | Rule 49 | Yes, with the same digit rules |
| Credit note | Rule 53 | Not in its list of fields |
Export orders
If you ship abroad, the HSN field still applies, and Rule 46 adds more. An export invoice must carry a line saying it is a supply meant for export. It also says whether you paid integrated tax or shipped under a bond or letter of undertaking. In place of the usual buyer details, it shows the buyer's name and address, the delivery address and the country of destination. Get these right before your first export parcel leaves.
Mixed carts and service lines
Two more cases catch sellers out. First, a cart can mix taxable and exempt goods. If the buyer has no GSTIN, Rule 46A lets you issue one invoice-cum-bill of supply for the whole cart, instead of two documents. Second, Rule 46 asks for a code for goods or services. So if you bill a separate service, such as an installation visit, that line needs its own code, not the product's.
Common mistakes to avoid
Sellers slip up in predictable ways. Using one code for a whole mixed catalogue. Copying a competitor's code without checking. Picking the code with the lowest rate instead of the correct one. Each of these invites a mismatch that surfaces at filing time, when it's hardest to fix.
Set it once, per product
The clean way is to store the right HSN code against each product when you add it. Then every invoice and every return pulls the correct code and rate on its own. You do the classification work once, up front, instead of on every single order for the rest of the year.
Set up HSN codes for your catalogue
- Export your product list with names and categories.
- Find the code for each product type, not each product.
- Check last year's turnover to pick 4 or 6 digits.
- Save the code on every product before your next order.
- Add codes for any service you bill on its own line.
- Ask a CA to confirm any code you are unsure about.
- Review the list each April, when your band can change.
Where your store helps
The Storemate keeps the HSN code with each product, so the right code and GST slab flow onto every invoice automatically. Set it when you add the product, and the tax math takes care of itself. You can also set one code on up to 500 products at once, and each invoice line prints the code with its GST rate. This is a starting point, not tax advice - confirm unusual classifications with a professional.