The mandatory inclusion of HSN codes in GSTR-1 filings has implications for businesses. Explore the details and compliance requirements to ensure accurate and timely tax reporting. The Goods and Services Tax (GST) Council has made it mandatory for taxpayers to mention HSN codes in their GSTR-1 returns. This is a crucial step towards harmonizing the Indian GST system with international standards and facilitating cross-border trade.

Phase 1

The implementation of mandatory HSN codes in GSTR-1 was carried out in a phased manner to ensure a smooth transition for taxpayers. Phase 1 involved the following steps:

• Part I: From April 1, 2022, taxpayers with an aggregate annual turnover (AATO) of more than Rs. 5 crore were required to mention 6-digit HSN codes for goods and 8-digit HSN codes for services in their GSTR-1 returns.
• Part II: From August 1, 2022, taxpayers with an AATO of Rs. 1.5 crore to Rs. 5 crore were required to mention 4-digit HSN codes for goods and 8-digit HSN codes for services in their GSTR-1 returns.

Phase 2

Phase 2 of the implementation involved making it mandatory for taxpayers with an AATO of up to Rs. 5 crore to mention 4-digit HSN codes for goods in their GSTR-1 returns. This phase was implemented from November 1, 2022.

Example of how GSTN is sending notices and taking action for HSN mismatches

The GSTN (GST Network) is taking proactive measures to ensure compliance with the mandatory HSN code requirement. This includes issuing notices to taxpayers who have not mentioned the correct HSN codes in their GSTR-1 returns. In some cases, the GSTN may also take punitive action, such as levying penalties, against non-compliant taxpayers.

Here is an example of how the GSTN is sending notices and taking action for HSN mismatches:

1. The GSTN identifies a taxpayer who has not mentioned the correct HSN code in their GSTR-1 return.
2. The GSTN issues a notice to the taxpayer, informing them of the error and asking them to rectify it.
3. If the taxpayer fails to rectify the error, the GSTN may levy a penalty.
4. In repeated cases of non-compliance, the GSTN may take more severe action, such as suspending the taxpayer’s GSTIN registration.The mandatory mention of the Harmonized System of Nomenclature in GSTR-1 is a positive step toward improving tax compliance and facilitating trade. Taxpayers should ensure that they are complying with this requirement to avoid any penalties or other adverse consequences.

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