An HSN code is a number that identifies a product. The first 2 digits are the chapter, 4 digits are the heading, 6 digits the international sub-heading and 8 digits the Indian tariff item. GST rate notifications list goods by these codes, so the code on your invoice decides the rate you charge. As of 21 October 2026, the goods rates are in Notification 9/2025-Central Tax (Rate) and its amendments.
How an HSN code is built
HSN codes are hierarchical. Take ghee. Chapter 04 covers dairy produce, eggs and honey. Heading 0405 is butter and other fats derived from milk. The six-digit sub-heading narrows it further, and the eight-digit Indian tariff item identifies ghee itself. The GST schedules mostly name goods at the 4-digit level, and use 6 or 8 digits only where one heading has more than one rate.
| Digits | Level | Example |
|---|---|---|
| 2 | Chapter | 04: Dairy produce |
| 4 | Heading | 0405: Butter, ghee and other milk fats |
| 6 | Sub-heading | Set internationally |
| 8 | Tariff item | Set by India in the Customs Tariff |
The rules for interpreting the Customs Tariff, including the Section and Chapter Notes, also apply to GST classification. The rate notifications say so expressly in their Explanation.
Why the HSN code decides your GST rate
Under GST 2.0, in force from 22 September 2025, the Central Government notified the CGST rate for each listed code in Notification 9/2025-Central Tax (Rate). Schedule I lists 5% goods, Schedule II 18%, Schedule III 40%, Schedule IV 3% (gold, silver, jewellery), and two small schedules cover diamonds and precious stones. Any goods not named elsewhere fall into the residual 18% entry. Notification 10/2025-Central Tax (Rate) lists goods that are fully exempt, such as fresh milk, salt, bread and notebooks.
One heading can carry more than one rate. Heading 1006 rice is nil when sold loose and 5% when pre-packaged and labelled. Chapter 62 garments are 5% up to ₹2,500 per piece and 18% above. So you need the right code and the right condition.
How to find the right HSN code for an item
- Start with what the item is made of and what it does, not its brand name.
- Find the chapter (for example, 85 for electrical machinery, 61 or 62 for apparel).
- Read the heading descriptions in the rate notification and pick the one that fits.
- Check whether the entry has a condition such as "pre-packaged and labelled" or a price per piece.
- Copy the code into your item master once, so every invoice uses it.
If two headings seem to fit, the more specific description generally wins under the interpretation rules. Where real doubt remains, an advance ruling or a tax adviser is the safe route.
Worked example
A kirana shop sells a 5 kg pack of branded atta for ₹300 and 2 kg of loose atta weighed out from a sack for ₹80. Both are heading 1101. The 5 kg pack is pre-packaged and labelled, so GST is 5%: if ₹300 is the taxable value, CGST is ₹7.50 and SGST is ₹7.50, total ₹315. The loose atta is nil-rated under Notification 10/2025-Central Tax (Rate), so it is shown on the bill with no tax. Both lines carry HSN 1101; only the rate differs.
Do it automatically in FundRaksha Book
In FundRaksha Book you set the HSN code and rate once on each item, and every GST invoice, the HSN summary and your GSTR-1 data use it. The first 300 invoices are free. Before you bill a new trade buyer, check their GSTIN on FundRaksha Trust.
Last reviewed: 2026-10-21. Information for Indian businesses; not legal advice.