HSN Compulsory for E-Invoice

Dec 30, 2023
HSN Compulsory for E-Invoice

Introduction to E-Invoicing:

Electronic invoicing (e-invoicing) is a digital invoice document exchange that happens in the business space. In the digital boost that India has been experiencing, e-invoicing has largely become the norm for several reasons. It is also common for filing GST purposes using tax filing software for accountants and the method has been recently amended.

A brief overview of E-Invoice.

Understanding the essential elements of an electronic invoice

One of the main elements of an electronic invoice is how you must maintain proper, detailed audit trails to track changes and approvals related to the invoice. E-invoices mostly ensure authentication using digital signatures and have the proper tax information and payment terms.

Definition and purpose of HSN

HSN is the abbreviation of Harmonized System of Nomenclature. Under this system, goods worldwide are systematically classified with a unique 6-digit uniform code. HSN code classifies over 5000 products worldwide.

Why HSN codes are essential for business

A proper classification helps the business landscape function with better clarity and HSN codes provide that. It offers a standardized way to classify traded goods. So, it becomes easy to discuss the information of each good, making it easier for cross-border transactions as it is easily communicated and complies with tax, international trade rules and more.

Overview of legal mandates related to electronic invoicing

The e-invoicing method for GST was recently amended. In the new change, it is mandatory for taxpayers with an Annual Aggregate Turnover (AATO) of Rs. 5 crores and more to include a minimum 6-digit HSN code in e-invoices. This legal mandate has been in effect from December 15, 2023. On the other hand, all businesses falling below this turnover threshold must include a minimum 4-digit HSN code in the e-invoices.

Streamlining tax compliance with accurate HSN coding

HSN coding is a major aspect of streamlining tax compliance because it simplifies tax calculation methods. HSN coding offers a consistent method for determining relevant tax rates and this uniform categorisation promotes a seamless workflow. So tax authorities can apply precise and uniform tariffs.

How the incorporation of HSN codes affects day-to-day business operations

Even businesses can easily and accurately classify their products which helps massively with the usual inventory management. Besides, they can also be used to figure out the tax rates in the GST portal, which will help businesses choose prices that are competitive and just.

Step-by-step guide on how to include HSN codes in electronic invoices

Step 1 - Login to the GST portal Step 2 - (Add HSN Code) In the dashboard, select services - user services -HSN / SAC Masters - Add HSN/SAC option Step 3 - Enter HSN Code Details, along with a description of the product/service and select applicable GST rate. Step 4 - Save HSN Code Step 5 - Verify the HSN Code

Summarizing the importance of HSN in E-Invoicing

HSN Codes have a greater, positive impact on e-invoicing. To begin with, HSN codes make it easier to identify the tax slabs of the products under GST. Including the code in e-invoice also helps with the systematic classification of products and services, keeps track of data analytics of international trade, aids in a smooth taxation process and massively controls tax evasion practices.


The move to mandate HSN codes in GST e-invoices is a very important and positive move that will benefit the business landscape. However, it might be initially difficult to integrate the coding system into the invoicing technology. It is easier to use the best tax software for accountants which will help you to easily integrate the HSN coding system and make more accurate e-invoices for GST.

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