As per GST Notification No. 78/2020 – Central Tax dated 15th October, 2020, it is mandatory for the taxpayers to report a minimum 4-digit or 6-digit HSN Code in table-12 of GSTR 1 on the basis of their Aggregate Annual Turnover (AATO) in the preceding Financial Year. To facilitate the taxpayers, these changes are being implemented in a phase-wise manner.
Part I & Part II of Phase 1 have already been implemented from 01st April 2022 and 01st August 2022 respectively and are currently live on GST Portal. From 01st November, 2022, Phase-2 would be implemented on GST Portal and taxpayers with up to Rs 5 crore turnover would be required to report 4-digit HSN codes in their GSTR-1.
- Businesses with a turnover of up to Rs. 1.5 crores declared zero digits of HSN code,
- Businesses with a turnover between Rs. 1.5 crores to Rs. 5 crores declared 2 HSN digits,
- Businesses with a turnover of more than 5 crores declared 4 HSN digits.
Let us understand the new changes in detail.
Phase – 1
Phase 1 (Part 1) – Taxpayers with AATO of up- to 5 cr.
Taxpayers are required to mandatorily report 2-digit HSN codes for goods & services. Manual user entry is allowed for entering HSN or description and warning or alert message shall be shown in case of manual HSN. However, taxpayers will be able to file GSTR-1 after manual entry.
Phase 1 (Part 1) – Taxpayers with AATO of more than 5 cr.
Taxpayers are required to mandatorily report 4-digit HSN codes for goods & services. Manual user entry is allowed for entering HSN or description and warning or alert message shall be shown in case of incorrect HSN code. However, taxpayers will be able to file GSTR-1 after manual entry.
Phase 1 (Part 2) – Taxpayers with AATO of up to 5 cr.
Same as part 1
Phase 1 (Part 2) – Taxpayers with AATO of more than 5 cr.
Taxpayers will now have to mandatory report 6-digit HSN code. No change in other conditions
Taxpayers with AATO of up- to 5 cr.
Mandatory reporting of HSN at 4-digits
Taxpayers with AATO of more than 5 cr.
|Turnover||Until March 31, 2021||From April 01, 2021|
|No. of HSN digits to be declared|
|Less than or equal to Rs. 1.5 crores||0||4|
|Between Rs. 1.5 crores and Rs. 5 crores||2||4|
|More than Rs. 5 crores||4||6|
Taxpayers with AATO of up-to 5 cr
- Taxpayers would be required to mandatorily report 4-digit HSN code.
- Manual user entry would be allowed for entering HSN or description and in case of a wrong HSN reported a warning or alert message will be shown. However, taxpayers will still be able to file GSTR-1
Taxpayers with AATO of more than 5 cr.
To continue as it is…
The taxpayers are advised to correct the HSN details where there is an error and a warning message is shown. However, it is not a mandatory validation for filing GSTR-1.
Further phases would be implemented on GST Portal shortly and respective dates of implementation and nature of change would be updated from time to time. Please refer notification No. 78/2020-Central Tax dated 15.10.2020 and GSTN advisory dated 20.07.2022 in case you want to learn more.
Any small, medium or large business enterprise gets multiple notices frequently from the government authorities. There are multiple GSTINs and multiple business lines to take care of, thus, discrepancies are common.
However, it is important that the business ensure all the notices issued by the authorities are received and acknowledged by them in a timely manner. There should not be cases of missing notices. Every notice is available for different GSTINs on the GST Portal. Logging in regularly can be a challenge for many. If even a single notice gets missed or misplaced then it may lead to penalties, ITC losses or in the worst cases, cancellation of GST registration.
In order to avoid this situation – IRIS GST experts recommend – Notice Management Software. The tool notifies you whenever a new notice has arrived and helps you manage it rightly. Reach out to us for more information: firstname.lastname@example.org
Example of how GSTN is sending notices and taking action for HSN mismatches:
Best software to reconcile GST data faster and ensure 100% compliance – IRIS GST Software
As a registered taxpayer, reconciling your purchase invoices with the supplier-uploaded invoices on the GST system is a critical activity as it determines your ITC claim. Further, the Government issues legal notices to taxpayers for discrepancies in the ITC claimed in GSTR 3B and the amount as per supplier uploaded details. Our Smart Reconciliation comes in handy for managing reconciliation tasks in a timely, efficient and easy manner.
Bulk Data upload facility – It will help you to upload data for multiple GSTINs in one go
2P Summary – Provides a summary of uploaded data. You can quickly check your uploaded data with the count of invoices getting considered for reconciliation
Bulk download of GSTR 2A – For multiple periods, you can send ’Get GSTR 2A data’ request in one go
Smart reconciliation – It auto-runs on your data and provides you the reconciliation results with summary
Advanced reconciliation – It helps you to extend the scope of comparison between data that is in the supplier-only and purchaser-only category. Some rules that help in better reconciliation are :
- Checking invoices across the financial years
- Fuzzy invoice no. logic
- Checking exact values ignoring invoice number
- Checking invoices within the tolerance provided by you
Monthly reconciliation results with monthly GSTR 2A report – Helps you to decide monthly ITC and how much you can claim as provisional ITC
Net vendor summary – It gives you a glance reconciliation status for each vendor
PAN level reports and GSTIN level reports – It will help you to analyse in detail of your purchaser-only and supplier-only invoices Send Mail – By using this feature you can easily communicate discrepancies to your vendor
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