HSN code mandatory in GST Return for Non GST goods

This is a bit of a tricky situation! Here’s why:

• HSN Codes and GST: HSN (Harmonized System of Nomenclature) codes are primarily used for classifying goods to determine their GST rate.
• Non-GST Goods: Non-GST goods, by definition, fall outside the scope of GST. This means they are either exempt or zero-rated.

So, why the confusion?

While HSN codes are fundamentally linked to GST, the government mandates reporting them in GSTR-1 for all outward supplies, including non-GST goods. This is mainly for data collection and analysis purposes.

Here’s what you need to know:

• Reporting is mandatory: Even though your goods are not subject to GST, you still need to report them in your GSTR-1 return.
• Use the correct HSN code: Ensure you use the appropriate HSN code for your non-GST goods.
• Specify the exemption: When reporting non-GST goods, clearly indicate that they are exempt from GST. This could be done in the description field or by using a specific tax rate code.

Why does the government do this?

• Data Analysis: Collecting HSN-wise data for all goods helps the government understand trade patterns, identify potential revenue leakages, and formulate better policies.¹
• Uniformity: It brings uniformity in reporting across all businesses, regardless of whether they deal with GST or non-GST goods.
• Future planning: This data can be useful for future GST rate revisions or for bringing more goods under the GST ambit.

In summary: Yes, HSN codes are mandatory in GSTR-1 even for non-GST goods. Ensure you report them accurately and clearly indicate their exemption status.