Important Keyword: Notification No. 78/2020 – Central Tax, HSN code GST India, CBIC notification October 2020, HSN digits tax invoice, Rule 46 CGST Rules, GST invoice compliance, HSN 4 digit 6 digit rule, GST April 2021 changes, Finodha GST compliance India.
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[F. No. CBEC-20/06/09/2019-GST]
Government of India
Ministry of Finance
(Department of Revenue)
Central Board of Indirect Taxes and Customs
New Delhi, the 15th October, 2020
Notification No. 78/2020 – Central Tax: Seeks to notify the number of HSN digits required on tax invoice.
Table of Contents
[To be published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i)]
G.S.R.....(E).—In exercise of the powers conferred by the first proviso to rule 46 of the Central Goods and Services Tax Rules, 2017, the Central Board of Indirect Taxes and Customs, on the recommendations of the Council, hereby makes the following amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.12/2017 – Central Tax, dated the 28th June, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 660(E), dated the 28th June, 2017, namely:–
In the said notification, with effect from the 01st day of April, 2021, for the Table, the following shall be substituted, namely, -
Table
| Serial Number (1) | Aggregate Turnover in the preceding Financial Year (2) | Number of Digits of Harmonized System of Nomenclature Code (HSN Code) (3) |
| 1. | Up to rupees five crores | 4 |
| 2. | more than rupees five crores | 6 |
Provided that a registered person having aggregate turnover up to five crores rupees in the previous financial year may not mention the number of digits of HSN Code, as specified in the corresponding entry in column (3) of the said Table in a tax invoice issued by him under the said rules in respect of supplies made to unregistered persons.‖.
(Pramod Kumar)
Director,
Government of India
Note: The principal notification number 12/2017 – Central Tax, dated the 28th June, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R.660(E), dated the 28th June, 2017.
📚 Frequently Asked Questions (FAQs): Notification No. 78/2020 – Central Tax
Q1: What is Notification No. 78/2020 – Central Tax about?
Answer:
Notification No. 78/2020 – Central Tax specifies the number of HSN digits that registered taxpayers must mention on their tax invoices from 1st April 2021, based on their turnover.
It amends the earlier Notification No. 12/2017 – Central Tax to ensure uniformity and accuracy in invoice reporting and GST returns.
Q2: What is an HSN Code and why is it important?
Answer:
HSN (Harmonized System of Nomenclature) is an international classification system developed by the World Customs Organization (WCO) to standardize goods identification.
It ensures:
✅ Consistency in goods classification.
✅ Easier GST compliance and filing.
✅ Accurate reporting and import/export documentation.
📘 For GST classification help, visit Finodha GST Compliance.
Q3: Is there any relaxation for small taxpayers?
Answer:
✅ Yes.
Taxpayers with aggregate turnover up to ₹5 crore need not mention HSN codes on B2C invoices (invoices issued to unregistered customers).
However, they must mention HSN codes on B2B invoices.
Q4: From when is this rule effective?
Answer:
This rule is effective from 1st April 2021, giving businesses adequate time to update their billing systems, GST software, and ERP tools.
Q5: What happens if a taxpayer fails to mention HSN codes correctly?
Answer:
Non-compliance may lead to:
Rejection of invoices by GST authorities or customers,
Mismatch in GSTR-1 & GSTR-3B, and
Penalties under Section 125 of the CGST Act (general penalty up to ₹25,000).
👉 Avoid compliance errors with Finodha GST Return Filing Services.
Q6: Why did CBIC issue this notification?
Answer:
To enhance data accuracy, reduce classification disputes, and facilitate better tax administration, especially during return filing and e-invoicing.
It also aligns India’s GST system with global trade norms and customs databases.
Q7: What is the difference between 4-digit and 6-digit HSN codes?
Answer:
4-digit HSN Code: Used for broad classification (e.g., “8504” for electrical transformers).
6-digit HSN Code: Used for specific product identification (e.g., “850440” for static converters).
The higher the digits, the more specific the product classification.
Q8: What are the benefits of including HSN codes on tax invoices?
Answer:
✅ Easier reconciliation between GSTR-1 and GSTR-2A/2B.
✅ Simplifies export documentation.
✅ Reduces classification disputes.
✅ Aids government data analytics for policy planning.
Q9: How does this notification relate to e-invoicing?
Answer:
From 1st April 2021, e-invoices automatically validate the HSN code for each line item.
Thus, accurate HSN reporting becomes essential to avoid IRN generation errors.
📘 Learn how e-invoicing affects you: Finodha GST Compliance.
Q10: Does this apply to all taxpayers, including service providers?
Answer:
Yes. The HSN code requirement applies to both goods and services:
For services, the equivalent term is the Service Accounting Code (SAC).
Example: SAC 998313 – Legal consultancy services.
Q11: How can taxpayers determine their correct HSN codes?
Answer:
Taxpayers can:
Refer to the GST rate notification tables.
Use the CBIC’s HSN/SAC search tool.
Consult GST experts or Finodha’s GST advisory team.
Q12: Does this rule impact return filing?
Answer:
Yes.
The correct HSN codes are auto-populated in GSTR-1, enabling better input tax credit matching for recipients.
Incorrect or missing HSN codes can lead to ITC mismatches and compliance notices.
Q13: How should businesses prepare for this change?
Answer:
✅ Update ERP or billing systems with correct HSN mappings.
✅ Train staff to use HSN codes accurately.
✅ Review old invoices to identify common classification errors.
💡 Simplify compliance with Finodha GST Return Filing.
Q14: What section of the CGST Rules authorizes this notification?
Answer:
This notification is issued under the first proviso to Rule 46 of the CGST Rules, 2017, which specifies the contents of a tax invoice, including the requirement to mention HSN codes.
🏁 Conclusion
Notification No. 78/2020 – Central Tax marks an important milestone in India’s GST system, making HSN code usage mandatory on tax invoices from 1st April 2021.
This move enhances transparency, reduces errors, and brings India’s GST in sync with international standards.
💡 Ensure HSN compliance in your invoices!
Consult Finodha GST Experts today for seamless return filing and e-invoicing integration.
Download PDF: Notification No. 78/2020 – Central Tax
More Information: https://taxinformation.cbic.gov.in/
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