What every Indian exporter needs to know about the HS code

Posted 2 years ago in TECHNOLOGY.

Customs agencies utilize Harmonized System (HS) codes to categorize export products numerically. WCO administers this export code.

What every Indian exporter needs to know about the HS code

This blog post explains how to get an HS code and its benefits.

Every day, millions of things, including jewellery, leather, spices, and clothes, are transported worldwide. The number of exporters has increased exponentially. This is why a code system was needed to assist international trade. The code standardized and identifies products independent of origin or destination. This is the Harmonized System of Classification and Coding of Products code.

HS Code: What is it?

The World Customs Organization maintains the Harmonized System of Nomenclature (HSN) (WCO). Harmonized System code codes are used for VAT, Excise, and Customs. The internationally approved nomenclature assigns a unique 6-digit identity to every product based on legislation specifying such codes. Over 200 countries use it to set customs fees and compile trade statistics. The Harmonized System classifies 98% of traded commodities.

The HS code's interpretation of product information ensures smooth export-import trade. It helps classify goods for external and internal tax collection during customs clearance.

If your products don't have an HS code or have an erroneous HS code, it will affect the calculation of standard duty rates. Also, you can be penalised for improper conduct of trade. Also, a wrong HS code or absence of the same would lead to cargo misidentification.

HS Code Characteristics

  • The guidelines for creating HS codes are laid out.
  • It provides a unified framework for product categorisation across the globe.
  • The HS codes include about 5,000 product categories that are traded on a global scale.

Indian HS Code Organization and Classification

The World Customs Organization (WCO) recommends using a six-digit HS code. But, extra codes or digits can be added as classification codes per country. Each country has a fixed classification code. For example, the USA has an HS code of 10 digits. WCO has assigned the first six digits out of the 10, whereas the US customs authorities assign the remaining four digits. They are known as HTS numbers or Harmonised Tariff Schedule.

India uses an HS code of 8 digits. Like other countries, WCO assigns the first six digits, while the last two are country-specific.

Sections and chapters of the HSN codes are used to categorise products further into 21 sections. Overall, it has 99 chapters to define a different product category (heading, tariff item and subheading).

Thus, the first two digits of the 8-digit ITC (HS) code help you locate the chapter number. The next two represent the heading, followed by the subheading in the next two digits. At last, the last two digits of the total 8 Digits are your tariff item numbers.

The HS Code and Its Applications

  • Import and export tariff rates that are specific to a product category
  • Analysis and gathering of international trade data
  • Calculation of internal taxes and obligations owed
  • These uses of HS codes are possible because of their universality across all of these applications.

To further illustrate the significance of HS codes in international trade, the process facilitates customs clearance by allowing for more orderly classification and organisation of goods. This means that both the importer and the exporter may read product information without any unnecessary confusion produced by the catalogue.

Customs officials use these identifiers when applying duties and taxes on shipments and tracking exports and imports.

Tips for determining the appropriate HS code for your commodity.

The Harmonized System (ITC) code for your goods may be found quickly, allowing you to export easily.

To find the correct HS code for your goods, follow these steps:

  1. a) go to the DGFT website;
  2. b) search the list provided by the Ministry of Commerce;
  3. c) once the latest list opens, search for the required chapter;
  4. d) verify the correct heading, subheading, and tariff item; and
  5. e) get the HS code.

Implications of HS Code Misuse

Improper use of the HS Code can cause delays at the border, product seizure, non-compliance fees, or even the loss of import privileges if the goods are misclassified.

GST and the Indian HS Code

A valid HSN code is essential for international trade on both ends of the transaction. However, there is a caveat to this code as well:

  • One does not need an HSN code if annual sales are less than INR 1.5 crores.
  • A two-digit HSN code is needed if annual sales are between INR 1.5 crores and INR 5 crores.
  • Third, if your annual sales exceed INR 5 crores, you need a four-digit HSN code.

The use of an eight-digit HSN code is mandated for international trade.

Where to start when looking to export from India?

Once you have the appropriate documents to export from India, you may utilise Amazon Global Selling effortlessly. Businesses from anywhere in India can export using Amazon's simple registration, product listing, and shipping capabilities. You can sell on Amazon USA, UK, Australia, UAE, and Singapore to tap the global market. If you have a brick-and-mortar store, a new product line, or offline exports, Amazon Global Selling can help you expand.

  • Get your company registered.
  • List your items
  • Collect remuneration

Register now! 

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john seo

Living in United States

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