GST ARTICLE

WHETHER HSN CODE IN GSTR - 1 IS MANDATORY?

Abhishek Tripathi, Advocate, Allahabad High Court

INTRODUCTION

Under the first proviso of Rule 46 of the Central Goods and Services Tax Rules, 2017 ('CGST Rules') CBIC vide Notification No. 78/2020-CT dated 15.10.2020 has notified 4/6-digit HSN Code, as the case maybe, to be mentioned in the invoices issued by the registered person. With effect from 01.04.2021, (i) 4-digit HSN Code is mandatory for all B2B tax invoices and, (ii) 6-digit HSN Code is mandatory for B2B and B2C tax invoices. Apart from the afore-mentioned notification, CBIC vide Notification No. 90/2020-CT dated 01.12.2020 has notified and mandated 8-digit HSN Code for 49 chemical products to be mentioned in the invoices issued by the registered person.

The history of the above notifications can be traced back to the 42nd GST Council Meeting. In the said meeting GST Council has recommended the requirement of HSN/SAC in the invoices as well as Form GSTR - 1. The relevant extract of the press release is reproduced hereinbelow for ease of reference:

5. Revised Requirement of declaring HSN for goods and SAC for services in invoices and in FORM GSTR-1 w.e.f. 01.04.2021 as under:

a. HSN/SAC at 6 digits for supplies of both goods and services for taxpayers with aggregate annual turnover above Rs. 5 crores;

b. HSN/SAC at 4 digits for B2B supplies of both goods and services for taxpayers with aggregate annual turnover upto Rs. 5 crores;

c. Government to have power to notify 8 digit HSN on notified class of supplies by all taxpayers.

Undeniably Notification No. 78/2020-CT dated 15.10.2020 and Notification No. 90/2020-CT dated 01.12.2020 mandates the requirement of mentioning 4/6/8 digit HSN Code in the invoices. On the other hand, w.e.f. 01.04.2021 is it required to specify 4/6/8 digit HSN Code in Table 12 of Form GSTR-1? Especially when there is no such notification mandating the requirement of HSN Code in Table 12 of Form GSTR - 1.

Just like invoices, experts have advocated apropos of the mandatory requirement of specifying HSN Code in Table 12 of Form GSTR-1. This article is regarding the legality of specifying 4/6/8 digit HSN Code in Table 12 of Form GSTR - 1.

LEGALITY OF SPECIFYING 4/6/8 DIGIT HSN CODE IN TABLE 12 OF FORM GSTR - 1

Neither Rule 59 of the CGST Rules explicitly nor any notification mandates the mentioning of the HSN Code in Table 12 of Form GSTR - 1. Thus, for intellectual nourishment whether the HSN Code in Table 12 of GSTR-1 is mandatory or not [w.e.f. 01.04.2021]? The said mandate emanates from Form GSTR - 1. As per instruction no. 18 of the Form GSTR - 1, it is mandatory to mention HSN/SAC Code for the class of registered person as they are required to mention in the invoices. Instruction no. 18 was inserted in Form GSTR - 1 vide Notification No. 82/2020-CT dated 10.11.2020. The relevant extract of instruction of Form GSTR - 1 is reproduced hereinbelow for ease of reference:

18. It will be mandatory to specify the number of digits of HSN code for goods or services that a class of registered persons shall be required to mention as may be specified in the notification issued from time to time under proviso to rule 46 of the said rules.

[Emphasis Supplied]

Rule 59(4) is in respect of furnishing mandatory details of outward supplies in Form GSTR - 1. Such mandatory details don't explicitly mention the requirement of specifying the HSN Code. Broadly the said rule mandated the details in connection with (i) invoice wise, (ii) consolidated supply wise and (iii) debit/credit note. The relevant extract of Rule 59 is reproduced hereinbelow for ease of reference:

Rule 59 (4) The details of outward supplies of goods or services or both furnished in FORM GSTR-1 shall include the-

(a) invoice wise details of all -

(i) inter-State and intra-State supplies made to the registered persons; and

(ii) inter-State supplies with invoice value more than two and a half lakh rupees made to the unregistered persons;

(b) consolidated details of all -

(i) intra-State supplies made to unregistered persons for each rate of tax; and

(ii) State wise inter-State supplies with invoice value upto two and a half lakh rupees made to unregistered persons for each rate of tax;

[Emphasis Supplied]

In view of Rule 59(4), Form GSTR-1 has distinct tables to cater for the three broad categories as stated above. If any information sought under Form GSTR - 1 found to be outside the purview of Rule 59(4) then the same may not be called mandatory information to be furnished. As already stated, instruction no. 18 of Form GSTR-1 has linked the mentioning of HSN/SAC with the notification issued under the first proviso of Rule 46. As both 'HSN Code in Form GSTR-1' and 'HSN under Invoice' are linked thus, we need to examine the invoice wise details table under Form GSTR - 1 hitherto, to ascertain the legality.

According to the instructions of Form GSTR-1, invoice wise details are to be furnished under Table 4, 5, 6, 7 and 10. HSN wise summary forms part of instruction no(s) 16, 17, and 18. Now the pertinent question is whether instruction no(s), 16, 17 and 18 forms part of invoice wise details as stated under Rule 59(4)? If HSN wise summary was required to be furnished under Table 4, 5, 6, 7 and 10, then undoubtedly because of linking with 'HSN under invoice', it must have been mandatory to be furnished. However, the requirement of HSN wise summary is made under Table 12 of Form GSTR -1 as 'HSN wise summary of outward supplies'. Thus, Table 12 of Form GSTR-1 may be construed as an additional detail apart from invoice wise details.

If HSN wise summary is considered to be under invoice wise details then it is mandatory to be furnished under Table 12 of the Form GSTR-1 and vice versa. Widely, the requirement of furnishing HSN wise summary has been considered mandatory by the experts. Despite that one may argue that the same is not the mandatory requisite under Rule 59(4). Way before instruction no. 18, we had instruction no. 16 and 17 making HSN Code mandatory following the same legality analogy as instruction no. 18.

In light of instruction no(s). 16, 17 and 18 there may be instances where the registered person might have defaulted in filling Table 12 of Form GSTR - 1. This non-mentioning of HSN wise summary might become contentious. And the requirement of furnishing Table 12 might become an interpretative battle once the department starts issuing notices.

WAY FORWARD:

The concerned registered person may start filing Table 12 of Form GSTR - 1 to avoid any unnecessary legal dispute. The registered person should be very careful while filing Table 12 of Form GSTR-1 and also, keep in mind to avoid any mismatch/wrong mentioning of HSN Code.

The author is an Advocate and Tax Practitioner based out of Uttar Pradesh and can be reached at lawyer.akt@gmail.com.

[Date: 25-05-2021]

(The views expressed in this article are strictly personal and academic in nature)