HSN Reporting Mandate

Here’s a simplified and detailed explanation of the changes regarding the reporting of HSN (Harmonized System of Nomenclature) codes in Table 12 of GSTR-1/1A as per the latest updates:

Background

• HSN Reporting Mandate:
  • Vide Notification No. 78/2020 – Central Tax (dated 15th October 2020), taxpayers must report HSN codes in Table-12 of GSTR-1 based on their Aggregate Annual Turnover (AATO) in the preceding financial year.
  • Implementation is being done in phases on the GST portal for ease of compliance.

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Current Status of Implementation

1. Phase 2 (Effective 1st November 2022):
   • For taxpayers with AATO up to ₹5 crores:
     • Mandatory to report 4-digit HSN codes for goods and services.
     • Manual entry is allowed.
       • Warning/alert messages are displayed for incorrect HSN entries.
       • Taxpayers can still file GSTR-1 even with manual entries.
   • For taxpayers with AATO above ₹5 crores:
     • Mandatory to report 6-digit HSN codes for goods and services.
     • Manual entry is allowed.
       • Warning/alert messages are displayed for incorrect HSN entries.
       • Taxpayers can still file GSTR-1 even with manual entries.
2. Phase 3 (Effective February 2025 Return Period):
   • For taxpayers with AATO up to ₹5 crores:
     • Mandatory to report 4-digit HSN codes for goods and services.
     • No manual entry allowed anymore.
       • Taxpayers must select HSN codes from a drop-down menu.
       • The description associated with the HSN code in the GST system will be auto-filled in a new field, “Description as per HSN Code.”
   • For taxpayers with AATO above ₹5 crores:
     • Mandatory to report 6-digit HSN codes for goods and services.
     • No manual entry allowed anymore.
       • Taxpayers must select HSN codes from a drop-down menu.
       • The system will auto-fill “Description as per HSN Code.”

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Enhancements in Table-12 of GSTR-1/1A (Phase 3)

1. Validation of Supply Values:
   • Purpose: Ensures consistency between the value of supplies reported in Table-12 (HSN summary) and other relevant tables in GSTR-1.
   • Validations check:
     • B2B Supplies: Values shown in Table-12 (B2B tab) vs. values in Tables 4A, 4B, 6B, 6C, 8, 9A, 9B, 9C, 15, 15A for registered recipients.
     • B2C Supplies: Values shown in Table-12 (B2C tab) vs. values in Tables 5A, 6A, 7A, 7B, 8, 9A (export), 9A (B2CL), 9B, 9C, 10, 15, 15A for unregistered recipients.
   • Important Notes:
     • In case of amendments, only the differential value will be validated.
     • Initially, these validations are in “warning mode.” Taxpayers will receive an alert in case of mismatches but can still file GSTR-1.
2. Separate Tabs for B2B and B2C Supplies:
   • New bifurcation in Table-12:
     • Two tabs: “B2B Supplies” and “B2C Supplies.”
     • Taxpayers need to enter HSN details separately under each tab.
3. New Functionalities:
   • Download HSN Codes List Button:
     • Taxpayers can download an updated Excel file of HSN/SAC codes with descriptions for goods and services.
   • Searchable Product Name Button:
     • Taxpayers can search descriptions in their HSN Master.
     • On selecting a product name, the system will auto-populate the HSN code, description, unit of quantity (UQC), and quantity.

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Key Takeaways

1. No Manual Entries Allowed in Phase 3:
   Taxpayers must select HSN codes from a predefined list in the GST system.
2. Auto-Population of Descriptions:
   The description corresponding to the HSN code will be auto-filled to ensure accuracy.
3. Validation of Supply Values:
   Supply values reported in Table-12 will now be validated against values in other relevant tables in GSTR-1. However, these validations are in warning mode initially.
4. Separate Reporting for B2B and B2C Supplies:
   Taxpayers need to enter HSN summaries under distinct tabs for B2B and B2C supplies.
5. Additional Tools for Convenience:
   • Updated HSN list available for download.
   • Enhanced search functionality in HSN Master for better usability.