Have you checked your HSN codes for forward Travel? If not, Read This....


Have you checked your HSN codes for forward Travel? If not, Read This....
Apr, 2021
By Vikash Dhanania


Today, we will share with you the reason for checking the HSN codes of your purchases while doing an Audit for HSN compliance.

I am sure you will be amazed by the concept and logic behind the numbering of HSN codes.

HSN codes are numbered in the forward direction in almost all of the cases, as we have witnessed in almost all Industries. This means that the HSN codes for Raw materials will precede the HSN code of the finished product in number.

To understand this, let's explore few examples:

1. The HSN code for Cotton fabric comes under chapter 52, and the HSN code for clothes made from Cotton fabric comes under Chapter 62/63.

2. The HSN code for Iron Ore extracted from a mine is 2601, whereas the HSN code for Pig Iron made from processing Iron Ore in a Blast furnace is 7201. Travelling further, the HSN code for sponge Iron made from Pig Iron is 7203 and the HSN codes of products made from Iron and Steel come under Chapter 73.

3. The HSN code of milk will come under Chapter 04, and a beverage made from milk will have 2202 as the HSN code.

This means that just by evaluating the HSN codes of your purchases and sales, you will get an idea of whether an evaluation is needed to be done for your Business or not?

Talking about some Facts that we can learn from this

I hope you have understood that the HSN codes for a Trader should not change. If there is a change in HSN codes in the case of a Trader, this means that he/she is processing or manufacturing the products.

This processing can either be done in-house or can be outsourced as Job Work to a contractor.

If your Business involves Job Work, then you must file your ITC-04.

If you are sending the goods to the contractor for Job Work with a delivery challan, it will be deemed valid only if you are filing ITC-04.

If you do not file ITC-04, your delivery will be considered as supply and will attract Taxes.

Small factors like these can create a huge problem for your Business that will involve loads of your time, efforts and Money.

Buying something with a higher HSN code and selling the same product after processing with a lower HSN code will raise a red flag in the system and invite Audits/Investigations.

So, make sure to carefully check the purchase and sales HSN codes in your Business to avoid any Issues in the Future.


If you have any doubts related to HSN codes or anything else in your Business, Contact GST DOST, and we will help by solving your GST problems and creating an automated and growth-driven GST system in your Business operations!!!

T: 90 8888 3000

E: support@gstdost.com


Thanks & Regards