HARMONISED SYSTEM OF NOMENCLATURE (Syllabus: GS Paper 3 – Economy)

Context: India is working to develop new tariff codes, called Harmonised System of Nomenclature or HSN codes in trade parlance, for certain rice varieties to enable exports of those that are traditionally not consumed by the people in the country.

Harmonised System of Nomenclature or HSN

• About: The HSN code is a 6-digit uniform code that classifies 5000+ products and is accepted worldwide. 
• Developed by: World Customs Organization (WCO) and it came into effect in 1988.
• Importance: The main purpose of HSN is to classify goods from all over the World systematically and logically. This brings in a uniform classification of goods and facilitates international trade.

HSN in India

• About: India is a member of World Customs Organization(WCO) since 1971.
• It was originally using 6-digit HSN codes to classify commodities for Customs and Central Excise. 
• Later Customs and Central Excise added two more digits to make the codes more precise, resulting in an 8-digit classification.

The Importance of HSN Under GST

• The HSN system serves beyond Customs agents, extending its significance to GST operations.
• HSN codes play a crucial role in streamlining the Goods and Services Tax (GST) framework.
• Utilizing HSN codes eliminates the necessity for exhaustive descriptions of goods in GST filings.
• Automation facilitated by HSN codes leads to significant savings in both time and financial resources for tax authorities.