There are 16 bullet points we should keep in mind while mentioning HSN Code in GST Invoice from this FY means the financial year 2021-22. Mandating the mention of HSN code on all tax invoices was a major change business had to go through.

• The amendment extends the previous amendment made in Notification 12/2017-Central Tax via Notification No. 78/2020 released on 15/12/2020.
• HSN Digits for turnover up to 5 cores

1. If supplied to the registered person  ==> 4
2. If supplied to unregistered person    ==> NIL

• For turnover over 5 crores :

1. If supplied to registered person ==> 6
2. If supplied to unregistered person   ==> 6

• For export:

1. If supplied to registered person ==> 8
2. If supplied to unregistered person   ==> 8

• According to Point 2 above, If turnover is below 5 crores, then it is optional for mentioning HSN code in B2C invoices.
• The 49 chemicals specified in the enclosed Annexure are to be shown as compulsorily 8 digits as per notification number 90/2020 released on December 1, 2020.
• According to points 3, 4 and 5 above, it is compulsory to mention the minimum digits in Table 12 of GSTR 1.
• According to points 3, 4 and 5 above, it is also compulsory to mention the minimum digits in Tax Invoices.
• The HSN digits have to be reported according to the total turnover for the preceding financial year.
• These 8-digit HSN Codes will also have to be mentioned on export invoices under the Foreign Trade Policy.
• These 8 digits ITC (HS) will be also mentioned on the export invoices as per requirement under Foreign Trade Policy and not under GST regime.
• There is a need to pay special attention to the tax rates since different items with just minor differences in the composition of the items will carry different HSN digits.
• Each and every tax invoice must contain HSN digits along with a description of goods and especially the tax rate for better transparency and to avoid any future litigation.
• A minor description change completely changes the tax rate as well as HSN code. A detailed explanation as to point 12 above will be an open disclosure in the event of any litigation or confusion.
• The government is implementing “Text Mining through ADVAIT” in the Regulatory Framework, it will be really easy for the department to track HSN mismatches and mistakes in tax invoices, E Way Bill, GSTR 1, GSTR 9, AOC 4, Registration Certificate, Cost Audit Report, Shipping Bill and Bill of Entry, and issuing of notices for penalizing Businesses automatically.
• There is also a Penalty of Rs. 50,000 to make a mistake relating to this particular scenario under Section 125 of GST.