Do you know how to apply the HSN Code in Tally ERP 9 Release 6? This article covers details about the HSN code and how to configure HSN codes in the latest version of Tally ERP 9.
What is an HSN Code?
The full form of the HSN code is the Harmonized System of Nomenclature. This six-digit code is used globally for the identification of goods, classifying more than five thousand products in a logical structure. It is considered the global standard for naming goods and is compulsory for Business-to-Business and Business-to-Customer tax invoices when supplying goods and services under GST. The HSN code in Tally systematically classifies both national and international goods, helping to identify the tax rate applicable to a specific product in a country. For businesses to accurately apply and manage HSN codes for tax purposes, GST registration is essential. This registration ensures compliance with tax regulations and enables effective tax reporting and collection based on the appropriate HSN classifications.
Who Needs the HSN Code?
The manufacturers, the importers, and the exporters use the HSN codes.
- Manufacturers have been furnishing these codes since the pre-GST regime
- The importers and exporters need to Furnish them with their import and export documents, respectively
- Dealers with a turnover lower than ₹1.5 crores do not need HSN codes
- Traders use these codes issued to them by the manufacturer or importer suppliers
- The business with turnovers between ₹1.5 crores and ₹5 crore uses two-digit HSN codes
Steps to Enter the HSN Code in Tally Erp 9 Release 6
Following are the steps for entering the HSN codes in Tally ERP 9 Release 6:
Turnover Criteria to Quote the HSN Codes
According to the GST Act, quoting the HSN codes in the invoice relies on the business’s turnover in the previous financial year. The table below will help you understand this:
| TURNOVER | TYPE OF INVOICE DOCUMENT | NUMBER OF HSN DIGITS TO BE DECLARED |
| Up to 5.0 crores | Compulsory for Business-to-Business tax invoice | 4 |
| Optional for Business-to-Customer tax invoices | 4 | |
| More than 5.0 crores | Compulsory for all invoices | 6 |
Specifying the HSN Code and Tax Rate on Tally
You can apply HSN codes and tax rates according to your business requirements.
| BUSINESS REQUIREMENT | LEVEL OF REPORTING |
| For Goods with the same HSN code and tax rate | Reporting is to be done at the company level |
| For the items with the same HSN code and tax rate |
a) Reporting is to be done at the company level for all items b) Reporting is to be done at the stock level only for the items with different HSN codes and tax rates. |
| For the items that have different HSN codes and tax rates. |
a) Reporting is to be done at the company level for all items. b) Reporting is to be done at the stock item level for items with different HSN codes and tax rates. |
| To set the same HSN code and tax rate for different transaction types. | Reporting is to be done at the sales/ purchases group level. |
| To identify sales or purchases of items with the same HSN code and tax rate. | Reporting is to be done at the sales/ purchases ledger level |
| To alter the tax rate( not HSN code) during the transaction. | Reporting is to be done at the transaction level |
Company Level
If the HSN code is the same for all the items, set these values at the company level once and it is done. It will be shown in your invoices for all your goods and services.
For configuration:
- Go to GATEWAY OF TALLY
- F11( COMPANY FEATURES)
- press F3( STATUTORY & TAXATION)
- press SET/ ALTER GST DETAILS TO YES
- SET/ ALTER GST DETAILS TO YES. Fill the DESCRIPTION
- Fill the HSN code
- Set the TAXABILITY to TAXABLE
Stock Item Level
If the items in a stock group have a different rate, then set up the HSN code at the stock item level for these items. It will then disallow the specified rates at the stock group level. For instance, Say there are five stock items- P, Q, R, S, and T under the same stock group. Item S and T have different HSN codes from P, Q, and R. So, you need to mention HSN codes for items S and T at the stock item level.
For configuration:
- Go to GATEWAY OF TALLY
- Press F11( COMPANY FEATURES)
- Press INVENTORY INFORMATION
- STOCK ITEM
- CREATE
- Press AGAINST “SET/ ALTER GST DETAILS”
- Enter YES
- Put the relevant HSN code by clicking on the TAX RATE HISTORY button on the right side
Stock Group Level
If a group of items have a different rate, you can set the HSN code to comply with the GST authority. The rate mentioned will apply to all the items in that group.
To configure this:
- Go to GATEWAY OF TALLY
- PRESS F11( COMPANY FEATURES)
- Press INVENTORY INFORMATION
- select STOCK GROUPS
- Click on CREATE
- Press SET ALTER GST DETAILS
- Enter YES
- Press TAX RATE HISTORY button on the right side and put the HSN code
Achieve financial clarity! Access our GST Calculator Online for seamless tax assessments.
Ledger Group Level
If you want to use the same HSN code for different transactions, mention the HSN code at the ledger group level for groups of sales, purchases, expenses, and income.
For configuration:
- Go to GATEWAY OF TALLY
- Press F11( COMPANY FEATURES)
- Press ACCOUNTS INFORMATION
- Select GROUPS
- Press CREATE
- Select the SALES GROUP.
- “SET/ ALTER GST DETAILS”
- Enter YES
- Put the HSN code
These are the various steps by which you can set the HSN codes in the TALLY ERP 9 Release 6 at the levels that apply to you.
Importance of HSN code
The HSN code makes the systematic classification of products globally acceptable. The following are the significance of the HSN codes:
- We use the HSN code to collect data and understand foreign and domestic trade more efficiently
- The HSN code is an internationally accepted code for classifying goods. It is a logical way to identify Goods for domestic and foreign trade
- It helps the government to decide the macroeconomic policies relating to the trade of these products
- Smooth taxation processes
Conclusion
Our country uses the HSN codes to classify goods for excise and customs. But after mandating the HSN code on Business-to-Business and Business-to-Customer business invoices from April 1, 2021, the numbering system has become more standard. If you face any hassle setting the HSN code, get in touch with us at Vakilsearch to receive information on it.
