HSN Validations in Table 12 of GSTR-1/1A

Abhishek Sinha

2 months ago

HSN Validations in Table 12 of GSTR-1/1A

The recent Advisory on HSN Validations in Table 12 of GSTR-1/1A, effective from the January 2025 return period, introduces Phase-3 of HSN code reporting. Here’s an in-depth exploration of the advisory with practical examples to help taxpayers understand and implement these changes.

What Are HSN Codes?

HSN (Harmonized System of Nomenclature) codes are internationally accepted codes used to classify goods and services for tax purposes. Under GST, taxpayers must report HSN codes in their returns, which ensures uniformity and helps the government track transactions effectively.

Key Changes Introduced in Phase-3

Mandatory HSN Reporting:
- Taxpayers with AATO up to ₹5 Crores: Must report 4-digit HSN codes.
- Taxpayers with AATO above ₹5 Crores: Must report 6-digit HSN codes.
Elimination of Manual Entries:
- HSN codes can now only be selected from a predefined dropdown list.
- Customized descriptions for HSN codes will auto-populate a new field titled “Description as per HSN Code.”
Validation of Supply Values:
- The values of B2B and B2C supplies reported in different sections of GSTR-1/1A will be cross-validated with Table 12.
- For example, if a taxpayer reports a value of ₹10,00,000 under B2B supplies in Table 4A, the same should reflect in Table 12. A mismatch will trigger a warning.
Two Separate Tabs for HSN Summary:
- B2B Supplies Tab: For reporting transactions with registered recipients.
- B2C Supplies Tab: For reporting transactions with unregistered recipients.
Enhanced Usability Features:
- A “Download HSN Codes List” button enables taxpayers to download an updated list of HSN & SAC codes in Excel format.
- The “Product Name as in My Master” feature is now searchable, and selected entries auto-populate the HSN code, description, UQC, and quantity fields.

Transition Made Simpler

Initially, the validations will remain in warning mode, allowing taxpayers to file GSTR-1/1A despite mismatches. This gradual approach ensures businesses have adequate time to adapt to these changes.

Practical Example

Scenario: A taxpayer with an AATO of ₹8 Crores in the preceding financial year sells machinery (HSN Code: 8479) worth ₹20,00,000 to a registered dealer and spare parts (HSN Code: 8483) worth ₹5,00,000 to an unregistered customer.

B2B Supplies:
- HSN Code: 8479
- Description: Machinery
- Value: ₹20,00,000
B2C Supplies:
- HSN Code: 8483
- Description: Spare Parts
- Value: ₹5,00,000

Under Phase-3:

The taxpayer must select the HSN codes from the dropdown menu.
Values for these transactions will be auto-validated with entries in other GSTR-1 tables.
If any discrepancies occur, a warning will be issued, but filing will still be permitted.

Benefits of These Enhancements

Accurate Reporting: Eliminates errors in HSN code entries by restricting manual inputs.
Improved Compliance: Encourages alignment of supply values across all sections of GSTR-1/1A.
Ease of Use: Features like the downloadable HSN list and searchable product descriptions simplify the filing process.
Streamlined Audits: Ensures data consistency, reducing the likelihood of audits or disputes.

A Note for Taxpayers

As the GST framework evolves, adapting to these changes is crucial. Businesses must ensure their teams are trained to use these features effectively. Regularly updating their systems and maintaining an accurate master of HSN codes will make the transition smoother.

These developments underline the government’s commitment to a robust and transparent GST regime. By embracing these updates, businesses can not only ensure compliance but also contribute to a more efficient tax ecosystem.