What is an HSN code?
HSN stands for Harmonized System of Nomenclature. It is an internationally accepted product-classification system developed by the World Customs Organization (WCO) and adopted by India under the GST regime. The HSN code identifies what is being sold or bought, at a level of detail that the tax department can use for rate matching, audit, and economic-data reporting.
Every manufactured product has an HSN code. So does every raw material, packaging item, or component. When you raise a tax invoice, your accounting software pulls the HSN code linked to that item and prints it on the invoice. The buyer's accountant reads the same HSN code, the GST portal reads it during GSTR-1 / GSTR-3B reconciliation, and customs reads it for export-import classification.
Under section 12(2)(b) of the CGST Act, 2017, every taxable invoice must carry the HSN code of the supplied goods at the level prescribed by notification. The level (2-digit, 4-digit, 6-digit, or 8-digit) depends on your aggregate annual turnover and on whether the transaction is domestic or export.
HSN code turnover thresholds (post-CBIC Notification 78/2020)
The CBIC issued Notification No. 78/2020-Central Tax on 15 October 2020 to revise HSN reporting requirements with effect from 1 April 2021. The current thresholds, still in force in May 2026, are below.
- Aggregate turnover up to INR 5 crore in the previous financial year: 4-digit HSN on B2B invoices; HSN is optional on B2C invoices.
- Aggregate turnover above INR 5 crore in the previous financial year: 6-digit HSN on all invoices (both B2B and B2C).
- Exports: 8-digit HSN is mandatory regardless of turnover.
- Imports under Customs: 8-digit HSN is always mandatory because customs uses the full tariff item.
Why correct HSN classification matters more in 2026
Three things changed between 2023 and 2026 that make HSN accuracy more consequential than it used to be.
First, e-invoicing now covers more taxpayers. The e-invoicing threshold dropped to INR 5 crore aggregate turnover from 1 August 2023. If your B2B invoice has the wrong HSN, the NIC Invoice Registration Portal still issues an IRN, but the buyer's GSTR-2A pulls the bad HSN. When their accounts team runs reconciliation, your invoice flags as a mismatch.
Second, ITC restrictions on rule 36(4) and 36(5) make buyers paranoid. A buyer can only claim ITC for invoices that appear in their GSTR-2B. If your HSN classification leads to a rate-tax mismatch (you charged 18% on an item that the buyer thinks is 12%), the buyer's auto-reconciliation tool flags the difference and your invoice gets held back until the next quarter.
Third, audits now look at HSN drift. Auditors comparing your GSTR-1 outward supplies against the e-way bill database will flag HSN codes that do not match between the two systems. Each mismatch is a question; many mismatches start a deeper audit. The cleanest defense is to maintain HSN in your item master once and let every downstream document inherit it.
How to find the correct HSN code for a product
There is no shortcut: you have to look it up. The legal source is the Customs Tariff schedule, mirrored on the CBIC GST portal at cbic-gst.gov.in. The Government's official HSN search is at gst.gov.in under Services > User Services > Search HSN code.
- Step 1: Identify the section of the tariff. Section XV is for base metals, Section XVI is for machinery, Section XVII is for vehicles and transport equipment, Section VI is for chemicals.
- Step 2: Identify the chapter (2 digits). For example, chapter 87 is for vehicles other than railway, chapter 84 is for machinery, chapter 72 is for iron and steel.
- Step 3: Identify the heading (4 digits). Heading 8708 is parts and accessories of motor vehicles, heading 7308 is structures of iron or steel.
- Step 4: Identify the sub-heading (6 digits). 8708.10 is bumpers and parts, 8708.30 is brakes and servo-brakes.
- Step 5: Identify the tariff item (8 digits) only if you export. 8708.30.00 is the most common entry for brake assemblies.
Common HSN codes for Indian auto parts manufacturers
Auto parts is by far the most-asked-about sector for HSN classification because the same physical part can fall under different headings depending on how it is described. Here are the codes our customers reference most often. Rates are current as of 1 May 2026.
- 8708.10.10 - Bumpers and parts thereof for motor vehicles - 28% GST
- 8708.30.00 - Brakes and servo-brakes; parts thereof - 28% GST
- 8708.40.00 - Gear boxes and parts thereof - 28% GST
- 8708.50.00 - Drive axles with differential, whether or not provided with other transmission components - 28% GST
- 8708.70.00 - Road wheels and parts and accessories thereof - 28% GST
- 8708.99.00 - Other parts and accessories of bodies (catch-all for unspecified auto parts) - 28% GST
- 7318.15.00 - Threaded screws, bolts and nuts (commonly used as auto fasteners) - 18% GST
- 4016.99.90 - Other articles of vulcanised rubber - 18% GST (rubber bushes, dampers)
Common HSN codes for sheet metal and engineering manufacturers
If you are in sheet metal, stamping, or general fabrication, your finished goods will commonly fall in chapters 72-73 (iron and steel) or chapter 84 (machinery).
- 7308.30.00 - Doors, windows and their frames of iron or steel - 18% GST
- 7308.90.90 - Other structures and parts of structures, iron or steel - 18% GST
- 7325.10.00 - Other cast articles of non-malleable cast iron - 18% GST
- 7326.90.99 - Other articles of iron or steel - 18% GST (general fabrication catch-all)
- 8421.21.00 - Machinery for filtering or purifying water - 18% GST
- 8479.89.99 - Other machines and mechanical appliances - 18% GST
Where HSN codes appear in your monthly returns
Even after you put the correct HSN on every invoice, the work is not done. In GSTR-1, you also file a Table 12: HSN-wise summary of outward supplies every month. This table aggregates all your outward supplies by HSN code, total quantity, total value, and tax split.
Table 12 must reconcile with the sum of your invoice-level HSN data in Tables 4 to 11 of GSTR-1. If they do not match, the portal throws a validation error and your return is held in draft. We have seen factories that file Table 12 manually by hand-aggregating from Excel; this is fragile. Any modern ERP, including ERPDrive, builds Table 12 directly from invoice data, so the totals reconcile by construction.
From October 2022, the HSN summary in Table 12 is required to be reported separately for B2B and B2C supplies (per CBIC instruction). Older systems that produce a combined HSN summary will fail validation. If your accounting software cannot produce a B2B/B2C-split HSN summary, that is a serious flag.
Common HSN classification mistakes (and how to avoid them)
Across the GST audits CA Pooja has led for ERPDrive customers in FY 2025-26, five HSN mistakes account for over 70% of issues:
- Using the same HSN for similar-looking parts. A cast iron bracket (7325) and an iron-or-steel bracket (7326) are different headings. Distinguish by material and casting process at master-data time.
- Charging 18% for an item that is actually 28%. Common in auto parts where the seller treats the part as 'general engineering' but the buyer treats it as 'motor vehicle part'. ITC reconciliation fails when this happens.
- Reporting only 4-digit HSN when turnover crossed INR 5 crore. Once you cross INR 5 crore aggregate in any FY, you must move to 6-digit HSN for the entire following FY, not from the date of crossing.
- Different HSN on invoice vs e-way bill. Both must match. The e-way bill validation flags mismatches, and the driver can be stopped at a check post.
- Not maintaining historical HSN for date-back invoices. If GST rates change mid-year, the rate applicable is the rate at the time of supply, not today's rate. Your system must remember the historical rate.
Frequently Asked Questions
What is the minimum HSN code digit requirement for Indian manufacturers in 2026?
Manufacturers with aggregate annual turnover up to INR 5 crore in the previous financial year must report 4-digit HSN on B2B invoices. Above INR 5 crore, 6-digit HSN is mandatory on both B2B and B2C invoices. Exporters must report 8-digit HSN regardless of turnover. This is per CBIC Notification 78/2020 effective 1 April 2021 and still in force in May 2026.
What HSN code should I use for auto parts manufacturing in India?
Most auto parts fall under HSN heading 8708 (parts and accessories of motor vehicles). Common sub-headings include 8708.10 (bumpers), 8708.30 (brakes), 8708.40 (gear boxes), 8708.50 (drive axles), 8708.70 (road wheels), and 8708.99 (other auto parts catch-all). The GST rate on auto parts under heading 8708 is 28%. Auto fasteners under heading 7318 (screws, bolts, nuts) are taxed at 18%.
Is HSN code mandatory on B2C invoices for small manufacturers?
For manufacturers with aggregate turnover up to INR 5 crore, HSN code is optional on B2C invoices (per CBIC Notification 78/2020). However, manufacturers above INR 5 crore must include 6-digit HSN on B2C invoices too. Most ERP systems include HSN on every invoice by default, since it adds zero overhead once the item master is set up correctly.
What happens if I use the wrong HSN code on a GST invoice?
The immediate impact is buyer-side ITC reconciliation failure: your invoice shows a different HSN or tax rate than the buyer's GSTR-2A pulls, so the buyer's accounting auto-reconciliation flags a mismatch. The buyer's accounts team may hold the invoice or ask you to issue a credit note and re-issue with the correct HSN. Repeated mistakes also flag during GST audit. There is no direct penalty for HSN errors, but section 122 of the CGST Act allows penalties up to INR 25,000 for issuing incorrect invoices.
How do I find the GST rate for a specific HSN code?
Use the official GST Portal HSN search at gst.gov.in (Services > User Services > Search HSN code) or the CBIC GST rate finder at cbic-gst.gov.in. Both tools return the current GST rate. As a quick reference: most auto parts under 8708 are 28%, most general engineering and sheet metal items under 73xx are 18%, electronic components under 85xx are mostly 18%, and plastics under 39xx range from 12% to 18% depending on the article.
Do I need to file an HSN summary in GSTR-1?
Yes. Table 12 of GSTR-1 is the HSN-wise summary of outward supplies and is mandatory for all GST-registered taxpayers. From October 2022, you must report Table 12 separately for B2B and B2C supplies. The Table 12 totals must reconcile with the aggregate of HSN values in your invoice-level tables (4-11). Most modern ERP systems generate Table 12 automatically.
Can ERP software automate HSN classification?
An ERP cannot automatically classify a brand-new product because that requires expert judgment based on material, function, and use. But once an item is created in the item master with the correct HSN, the ERP should propagate that HSN to every transaction (purchase order, GRN, sales order, invoice, e-way bill, e-invoice, GSTR-1 Table 12). ERPDrive enforces HSN as a mandatory field at item-master creation and prevents any transaction from being raised without a valid HSN-rate combination.
Sources & References
This article cites the following primary sources. Click through for the official source documents: