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GST FAQ

What is Harmonized System Nomenclature (HSN)?

HSN code number is widely used in many countries for the classification of goods for taxation purpose, claiming benefits, etc. HSN for each commodity is accepted by most countries and remains the same for most goods. In some countries, it may vary slightly based on the nature of classification of goods.


How is HSN relevant to GST?

In India, when implementing GST, all goods are to be classified on the basis of HSN number. Currently, HSN number is primarily used for classifying goods to compute Value Added Tax (VAT) in India. The same HSN is to be adopted for classifying Goods and Services Tax (GST). Hence, when preparing tax invoice for GST, you will be required to mention HSN number on the GST invoice.


What is the format of HSN code?

HSN code can be 2-digit, 4-digit, 6-digit or 8-digit. About 21 groups of HSN codes are classified. These 21 sections of HSN codes are sub-classified into 99 chapters of HSN code. Each chapter can be named as 2-digit HSN number. Each 2-digit HSN number is further classified into 4-digit HSN code. Based on such 4-digit HSN codes, the sub-classification is done as 6-digit HSN code.
As per Harmonized System of Nomenclature accepted worldwide, 6-digit HSN code is accepted. However, in most countries, additional 2-digit HSN code is added in the last part of such HSN code number to sub-classify a 6-digit HSN code number.


How are different formats of HSN code number used?

HSN code numbers are primarily used for taxation purpose, especially for Import and Export worldwide. A 6-digit HSN code number is accepted for Export and Import calculation of duties and levies worldwide. In India, 8-digit HSN codes are used for the computation of Tax for Import and Export.


How will the goods and services be classified under GST regime?

HSN code shall be used for classifying goods under GST regime. Taxpayers whose turnover is between Rs. 1.5 crores and Rs. 5 crores shall use 2-digit code and the taxpayers whose turnover is Rs. 5 crores and above shall use 4-digit code. Taxpayers with turnover below Rs. 1.5 crores are not required to mention HSN code in their GST invoices. Services shall be defined as per the Services Accounting Code (SAC).​


What is Services Accounting Code?

The Services Accounting Codes (SAC) have not been declared in the Model GST Law but they will remain the same as current codes used for Service Tax.


What does time of supply mean under GST regime and why is it significant for the taxpayer?

Under the GST regime, time of supply refers to the time when the taxpayer is liable to pay charges under GST. It also indicates when supply of goods and services is made. The GST law provides separate time of supply for goods and services.


When will the taxpayer pay charges under GST for the services he delivers?

Taxpayer will pay charges under GST (for the services he supplies) based on the invoice of services.

If the invoice is issued within the prescribed period (i.e., within 30 days from the date of supply), the seller will have to pay all charges either by date of issue of invoice or by the date of receipt of payment (whichever is earlier).
If, however, the invoice is not issued within the prescribed period, seller will pay all charges either by the date on which service provision was completed or by the date of receipt of payment (whichever is earlier).

What does date of receipt of payment mean?

It refers to the earliest date on which the payment is entered in the books of accounts of the supplier of services or the date on which payment is credited to his bank account.


If the invoice is not issued within the prescribed period and the date of completion of service provision and the date of payment are also not ascertainable, when will the seller be required to pay the charges (i.e. how will the time of supply be determined)?

The time of supply will be the date on which the recipient of services shows the receipt of services in his books of account.


In case the taxpayer makes part advance payment for services or issues invoice for part payment, does the time of supply cover the full supply?

No, the supply is deemed to have been made to the extent it is covered in the invoice or the part payment.


What is place of supply of goods and services under GST and why is it required?

The basic principle of GST is that it should effectively tax consumption of supplies at the destination or at the point of consumption of goods or services. Place of supply under GST regime is the place; i.e., the taxable jurisdiction where the tax should reach. Place of supply determines whether a transaction qualifies as inter-state or intra-state, which in turn will determine whether SGST plus CGST or IGST would be applicable for the transaction.


What will be the place of supply if the goods are delivered by the supplier to a person on the direction of a third person?

It would be deemed that the third person has received the goods and the place of supply of such goods shall be the principal place of business of such a person. (Section 5(2A) of IGST Act)


What is the default presumption for place of supply with respect to B2B supply of services?

The terms used in the IGST Act are registered taxpayers and non-registered taxpayers. The presumption in case of supplies to registered person is the location of such a person. Since the recipient of services is a registered entity; hence, address of the recipient is always considered as the place of supply.


What is the default presumption for place of supply with respect to an unregistered recipient?

With respect to an unregistered recipient, the usual place of supply is the location of the recipient. However, in many cases, the address of the recipient is not available. Therefore, in such cases, location of the supplier of services is considered as the place of supply.




For more detailed information click here to visit the GST portal.