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HSN NIC codes for General store

by Tandava Krishna


The Government of India comes up with different policies for the levels of businesses in India. The number Small and Medium Enterprises are estimated to be at 42.50 million, registered & unregistered together. A staggering 95% of the total industrial units in the country and employs around 40% of India’s Workforce. The Business done by these enterprises is enormous and to keep a systematic check on the business, tax revenues and product pricing and their taxation, etc certain codes are made such as National Industrial Classification Code (NIC Code) and Harmonized System Nomenclature (HSN). These codes are required mandatorily in India to set up a small business and for correct implementation of GST. Even if it sounds very complicated, it eases the workload of the retailers like a General Store Owner to a large extent as the categories help to put the correct GST on products and prevent confusion. 

Let us understand more about these codes first…

National Industrial Classification Code :

The National Industrial Classification Code (“NIC Code”) is a statistical standard for developing and maintaining a comparable database for various economic activities. This code has been developed with an intent to ascertain and analyze as to how each economic activity is contributing towards national wealth.

The Department of Policy and Promotion in their Press Note 4 (2014 series) dated 26 June 2014 decided to switch over to the NIC 2008 from the NIC 1987 version. Since then, all Indian Companies are advised to follow NIC 2008.

NIC 2008 is more compatible with the international system of classification. This enables the compliance processes for registration to flow in a smooth manner.


1) Udhyog Aadhar:

UdhyogAadhar is a registration provided to micro, small and medium-sized businesses in India under the Micro, Small and Medium Enterprise Development Act, 2006 (MSMED Act). While applying for UdhyogAadhar, the NIC code needs to be submitted.

2) Company Registration/ LLP Registration:

For incorporating a company or an LLP, one needs to register the respective company/LLP on the MCA (Ministry of Corporate Affairs) Portal. While registering, the NIC code of the business is required.

As a lot of benefitting policies are announced by the government during the budget sessions, to take full advantage of any scheme, any enterprise be it small or big needs to be registered with the government. To make the task of this registration easier and to classify various industries in the country and to categorize them in number, NIC code is required, which makes the work of government and that of the merchant easier as there is a fixed protocol that is advised to be carried out. General Store Owners who struggle a lot with big industries rising alongside have their fixed number under certain retain sections through which they can easily register and enjoy the benefits if any.

Harmonized System Nomenclature:

Harmonized System Nomenclature or HSN is a six-digit code that classifies more than 5000 products, arranged in a legal and logical structure to achieve uniform classification and is accepted worldwide.

The WCO (World Customs Organization) developed HSN as a multipurpose international product nomenclature that first came into effect in 1988 with the vision of facilitating the classification of goods all over the World in a systematic manner.

HSN classification is widely used for taxation purposes by helping to identify the rate of tax applicable to a specific product in a country that is under review. It can also be used in calculations that involve claiming benefits.

India has been a member of the WCO (World Customs Organization) since 1971. It initially employed six-digit HSN codes to classify merchandise for Customs as well as Central Excise duties. To make the codes more precise, the Customs and Central Excise authorities went on to add two more digits. This resulted in an eight-digit HSN classification.

Almost all goods in India are classified using the HSN classification code, which facilitates the use of HSN numbers for calculations of the Goods and Service Tax (GST).  The number is currently being used to categorize goods to compute VAT (Value Added Tax).

When GST was introduced in India, it brought a great deal of confusion for our General Store Owners as the products in the shops are not organized very categorically and as it is local, bargaining is also involved and thus to characterize a product under certain Tax Slab was a big task they had to execute. The HSN number makes this task a lot easier as when HSN code is entered, the accounting or record-keeping systems can automatically pick up the related tax rates of the commodities under the GST regime. This ecosystem hence simplifies the trade procedures. Hence, it is important to mention the correct HSN codes during enrolment or registration under GST. GST compliant accounting systems like Cygnet FACE or any other have the facility to pick up the related tax rates once the HSN summary is fed into the system and the Invoice with the correct tax will be auto-populated. 

GST returns are completely automated, it will be hard for the dealers to upload the description of the products being supplied. Hence, HSN Codes shall be automatically picked up from the registration details of the dealer.

HSN codes eliminate the need to upload a detailed description of the goods. This will save time and make filing easier since GST returns are automated. 

The codes and numeration are developed by the government to control and check on businesses according to the guidelines so that there are no defaulters. It may have a lot of complications but once you understand the protocol, it makes the life of a merchant better. It is seen that since these systems are brought to bring my systematic division and understanding of businesses in India when general stores follow these rules and regulations, they will be able to enjoy the benefits given to them by the government. In all customers have also become aware of how the government system works, to avoid the black money they also comply with these codes and policies and demand rightful billing and question the general store managers. It is important to follow these regulations for the betterment of your store and the ease of doing business in India. 


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