Implementation of HSN Code is Mandatory for GSTR -1 & 1A Returns Filling – From Febraury 2025 onwards.

If you’re running a business in India, you’ve probably come across HSN codes while dealing with GST filings.

What is an HSN Code?

HSN (Harmonized System of Nomenclature) is a globally recognized system for classifying goods. 

It was developed by the World Customs Organization (WCO) to standardize product classification for taxation, trade, and customs purposes. 

India, HSN codes play Major role under the GST (Goods & Service Tax), helping businesses identify the tax rates in right manner for their products and ensuring accuracy in tax calculations.

Latest Update on Mandatory HSN Code Reporting

On Jan 22nd, 2025, the GST Department officially announced the Implementation of mandatory Reporting of HSN codes in Table 12 of GSTR-1 GSTR 1A, under the News & Updates section of its official website.

Starting from Feb 2025 onwards GST Department turned into Phase III of the Implementation of Reporting the HSN code is mandatory, before that Phases I & II were completed. before going to details first please understand the HSN code in details 

Structure of HSN Code in India

HSN codes are structured step-by-step, using 6 to 8 digits to classify products in detail.

  • First 2 digits – Identify the main category (chapter) of the product.
  • Next 2 digits – Specify the section (heading) within that category.
  • Next 2 digits – Further narrow it down to a sub-category (sub-heading).
  • Last 2 digits (if present) – Provide a more detailed classification.
Example: HSN Code for Sugar – 1701 13
  • 17 – Falls under the Sugars & Sugar Confectionery category.
  • 01 – Specifically refers to Cane or Beet Sugar.
  • 13 – Further classifies it as Raw sugar without added flavoring.

Phases I :

From 1st April 20222 onwards Part 1 of Phase I  has been live on the GST Portal at that time.

After that 01st August 2022, Part II of Phase-I would be implemented on the  GST Portal and the taxpayers would need to report HSN in table 12 of GSTR-1 form

  1. Part 1:
  • Taxpayers with AATO (Annual Aggregate Turnover) of up-to 5 cr

    Taxpayers must mandatorily report 2-digit HSN codes for both goods and services. While users can manually enter the HSN code or product description, the system will display a warning or alert message if the entry is made manually. However, businesses will still be allowed to file GSTR-1 even after manual entry at that time GSTR -1A not available on the portal.

  • Taxpayers with (Annual Aggregate Turnover) AATO of more than 5 cr.

      Taxpayers must mandatorily report 4-digit HSN codes for both goods and services. While users can manually enter the HSN code or product description, the system will display a warning or alert message if the entry is made manually. However, businesses will still be allowed to file GSTR-1 even after manual entry.

2.  Part 2:

  • Taxpayers with AATO (Annual Aggregate Turnover) of up to 5 cr

          Same as per the part 1

  • Taxpayers with (Annual Aggregate Turnover) AATO of more than 5 cr.

       Taxpayers will now have to mandatory report 6-digit HSN code. No change in other conditions

Phases II :

From November 1, 2022, Phase 2 was implemented on the GST portal, requiring taxpayers to report HSN codes in Table 12 of GSTR-1. If there is an error in the HSN details, the system will show a warning message, advising taxpayers to correct it.

However, this is not a mandatory requirement, and businesses can still file GSTR-1 even if the warning appears.

  • Taxpayers with AATO (Annual Aggregate Turnover) of up to 5 cr

        Taxpayers would be required to mandatorily report the 4-digit HSN code.

  • Taxpayers with (Annual Aggregate Turnover) AATO of more than 5 cr.

          No change, To continue as per Part 2 of Phase 1.

Phase III ( Currently Live):

As we already discussed From February 2025 return onwards, Phase III will be applicable.

  • Taxpayers with AATO (Annual Aggregate Turnover) of up to 5 cr

   From February 2025, GSTR-1 & 1A Return, businesses must mandatorily report 4-digit HSN codes for goods and services. 

   Unlike before, manual entry will no longer be allowed instead, Now HSN codes must be selected from a drop-down list. The system will also auto-fill the product description based on the selected HSN code.

   To ensure accuracy, the GST portal has introduced validations in Table 12 to match the reported values of B2B and B2C supplies with other relevant tables. 

   If there’s a mismatch, a warning message will appear, but businesses can still file GSTR-1&1A without issues.

   As part of these changes, if a taxpayer reports B2B supplies in other sections of GSTR-1, the B2B section in Table 12 cannot be left blank.

   This update aims to make tax reporting more accurate and transparent while allowing businesses time to adjust.

  • Taxpayers with (Annual Aggregate Turnover) AATO of more than 5 cr.
   Businesses/ Taxpayers must mandatorily report 6-digit HSN codes for goods and services.
 
   All other conditions are same as we already mentioned in Taxpayers with AATO  of up to 5 cr of Phase III.

 

Phase IV:

Coming soon… Still Loading.

Additional Enhancements in Table-12 of GSTR-1/1A

  • Separate Tabs for B2B & B2C Supplies – Table-12 is now split into two sections: “B2B Supplies” and “B2C Supplies”, requiring taxpayers to enter HSN details separately for each.

  • Download HSN Code List – A new “Download HSN Codes List” button allows taxpayers to download an Excel file with updated HSN & SAC codes along with descriptions.

  • Searchable Product Name Feature – The “Product Name as in My Master” field is now searchable, making it easier for taxpayers to find their saved descriptions. Once selected, details like HSN code, description, UQC, and quantity will auto-fill (optional feature).

  • In the initial period, these validations have been kept in warning mode only, which means failing the validation will not be a blocker for filling of GSTR-1& 1A.

Frequently Asked Questions

HSN (Harmonized System of Nomenclature) is a globally recognized system used to classify goods for taxation and trade. Under GST, HSN codes help businesses accurately determine tax rates and ensure compliance with government regulations.

  • If your Annual Aggregate Turnover (AATO) is up to ₹5 crore, you must report 4-digit HSN codes.
  • If your AATO exceeds ₹5 crore, you must report 6-digit HSN codes.

The GST portal has built-in validations that will warn you if there is a mismatch between HSN codes and reported supplies. However, you can still file GSTR-1 & 1A even if a warning appears.

able 12 is now split into two sections:

  • B2B (Business-to-Business) Supplies
  • B2C (Business-to-Consumer) Supplies

If you're reporting B2B transactions in other sections of GSTR-1, you cannot leave the B2B section blank in Table 12.

No, manual entry is no longer allowed. You must choose from the GST portal’s dropdown list, which will automatically fill in the product description.

For now, validation errors are in warning mode, meaning you will still be able to file your return. However, stricter enforcement may follow in later phases.

Yes, all businesses filing GSTR-1 & 1A must comply with the new HSN reporting requirements, regardless of size.

Yes, service providers must use SAC (Service Accounting Codes), which follow the same mandatory reporting structure as HSN codes for goods.