Imagine you own a wholesale business owner with an Aggregate Annual Turnover (AATO) exceeding Rs. 5 Crores. Previously, when generating e-Invoices for your transactions, you only needed to include basic details such as the product name, quantity, price, and tax rate.

However, with the latest GST e-invoice system mandate announced on December 04, 2023, a significant change has been introduced. It states, “Atleast 6-digit HSN will be mandatory in e-lnvoices, for taxpayers whose AATO is 5Cr and above, from 15th of December 2023.” Similarly, businesses with turnover less than or equal to Rs. 5 crore must use 4-digit HSN code for all the B2B invoices. However, this reporting is optional for B2C invoices.

In simpler terms, you are now required to incorporate a minimum of 6 digits of the Harmonized System of Nomenclature (HSN) code in your e-Invoices starting from December 15, 2023.

For example, let's say you sell electronic gadgets such as smartphones. Previously, your e-Invoice might have listed the product as "Smartphone" with a generic tax code. Now, with the new mandate, you must specify a more detailed HSN code that accurately categorizes the smartphone based on its characteristics, such as its model, features, and specifications. For instance, instead of "Smartphone," your e-Invoice might now include a 6-digit HSN code (as prescribed in the guidelines) identifying it as a "Mobile Phone with Touch Screen Display," with additional digits indicating specific features like camera resolution, storage capacity, and processor type. For businesses, this ensures compliance, enhances tax reporting accuracy, and promotes transparency in transactions, optimizing efficiency. Similarly, for the government, enforcing the 6-digit HSN code in E-invoices underlines their commitment to streamlining tax procedures, promoting transparency, and refining the accuracy of product and service categorization.