What is GST Product Classification or HSN Codes? How does it work?

Under GST Product Classification, products in each category have been classified into HSN Codes. HSN codes need to be present at the time of filing GST Tax to the government in addition to your GST ID.

Watch the video below to learn about GST Product Classification or HSN Codes-

HSN code of a product can be of 4 digits or 2 digits. The HSN code that online sellers have to use depends on your annual turnover. Let us learn this with the help of an example.

Ramesh, Suresh and Jai are three online sellers who are selling leather shoes with rubber soles. Let us see which HSN code will they use-

  • Ramesh: Annual Turnover is greater than 5 crores then HSN Code is 6403
  • Suresh: Annual Turnover is greater than 1.5 crores & less than 5 crores then HSN code is 64
  • Jai: Annual Turnover is less than 1.5 crores then No HSN code is required.

Note that GST tax rate applicable for Ramesh, Suresh and Jai will either be either 5% (if shoe is less than Rs. 500) or 18% (if shoe is greater than Rs. 500).

Similarly, if an online seller is selling-

  1. Sports Shoes: HSN code will be 6404 or 64
  2. Sandals or Flipflops (Rubber/Plastic): HSN code will be 6402 or 64
  3. Wristwatch (metal): HSN code will be 9101 or 91
  4. Sunglasses or spectacles: HSN code will be 9004 or 90
  5. Sarees: HSN code will be 5407 or 54
  6. Unstitched dress material: HSN code will be 6307 or 63

Don’t worry! In the coming days, Shop101 will be introducing an easy way to classify your products using the Shop101 App. HSN codes will be automatically assigned to your products.

We will be releasing more informative videos on GST , you can subscribe to our YouTube channel so that you don’t miss future updates.

 

What are different GST Tax Rates for an online seller? How are they applied?

Under the Goods & Services Tax Act (GST), products from each category have been placed in one of the 4 different Tax Slabs.

Watch the video to better understand “GST Tax Slabs”-

For online sellers, the 4 Tax Slabs for their goods/products are-

  1. Exempted Goods – 0% Tax is applicable
  2. Commonly Used Goods – 5% Tax is applicable
  3. Standard Goods – 12% or 18% Tax is applicable
  4. Luxury Goods – 28% Tax is applicable

Important thing to note for Online Sellers is- From 1st July, 2017, every product sold you have to collect GST Tax Rate in accordance to the Tax Slab your product falls in.

Let us look at some of the popular product categories that are sold by online sellers and their applicable GST Tax Rate-

  1. Shoes
    • Shoes below Rs. 500 – 5% Tax is applicable
    • Shoes above Rs. 500 – 18% Tax is applicable

(Note about additional shipping charges- Online Sellers, if you are selling shoes for Rs 450 & additional shipping charge is Rs 70, then total is Rs 520 & 18% Tax is applicable)

  1. Garments such as Saree, Suits, Lehenga, Dress, Shirts, Pants, T-shirts, Jeans etc
    • Garments below Rs. 1000 – 12% Tax is applicable
    • Garments above Rs. 1000 – 18% Tax is applicable
  2. Watches – 28% Tax is applicable
  3. Spectacles & Sunglasses – 12% Tax is applicable
  4. Mobile Phones – 12% Tax is applicable
  5. Cosmetic Products – 28% Tax is applicable
  6. Artificial Jewellery – 3% Tax is applicable

As an online seller, you might be selling products in a mix of categories which might or might not have been covered here. Don’t worry !

We at Shop101 are working to make your transition to GST as smooth as possible. We will be releasing more informative videos on GST in coming days. Please subscribe to our YouTube channel so that you don’t miss future updates.

Upcoming:  How to find out applicable tax rate under GST Product Classification (HSN Codes) for your products.

To know about what is GST,  read our previous post on What is GST?

What is GST and how does it affect you?

To better understand GST, watch “GST Introduction for Online Sellers”

  1. The Goods and Services Tax Act (GST) is an Indirect Tax that you pay on behalf of your customers to the Government of India. GST will applicable in the country effective on 1st July, 2017
  2. Before this date, all the registered taxpayers under the State Sales Tax or VAT, Service Tax, Central Excise, Entry Tax, Luxury Tax and Entertainment Tax need to enroll at the GST Common Portal
  3. Earlier, Online Sellers had to pay various taxes such as VAT, Octroi, Sales Tax or Service Tax. All these taxes will be replace with one tax- GST
  4. For online sellers, there is no waiver on GST. You must file GST for every online order. The waiver limit of 20 lakhs for GST is not applicable for online sellers.
  5. There are different tax rates depending on the category of product sold by you.

How to register for GST?

  1. If you are already registered for VAT, the State VAT Department will have communicated the provisional ID and password to you. Use provisional ID and password for accessing the GST Common Portal and register yourself as a New User
  2. If you are registered taxpayer with other tax departments and NOT under VAT Department will also be shared their provisional ID by their concerned department.
  3. If you are not an existing Taxpayer and wish to register newly under GST, you would be able to apply for new registration at the GST portal from 25th June 2017. GST Common Portal
  4. You can start by going through GST Registration Tutorial video prepared to help you understand the registration process.

We at Shop101 are working to make your transition to GST as smooth as possible. We will be releasing more informative videos on GST in coming days. Please subscribe to our YouTube channel so that you don’t miss future updates.

Upcoming- What are the different GST Tax Rates applicable to my products and How to find out applicable tax rate under GST Product Classification (HSN Codes) for your products?