On June 10, 2025, the Central Board of Indirect Taxes and Customs (CBIC) clarified an important point about HSN code reporting in GSTR-1. Responding to a recent GSTN advisory, CBIC confirmed:
- HSN codes are mandatory for all B2B (business-to-business) transactions, no matter the size of your business.
- For B2C (business-to-consumer) transactions, HSN codes are optional if your total turnover was ₹5 crore or less in the previous financial year.
This change ties in with a recent GSTN system update that came into effect on May 1, 2025, where Table 12 in GSTR-1 has been split into two parts—B2B and B2C—to improve accuracy and reduce errors.
What the Law Says
CBIC clarified that this is not a new rule but a continuation of existing provisions from Notification No. 12/2017 – Central Tax. Under this rule:
- If your annual turnover is up to ₹5 crore, you don’t have to mention HSN codes for B2C invoices.
- But for B2B invoices, mentioning HSN codes is mandatory, regardless of your turnover.
What Changed from May 1, 2025?
The GSTN made some system-level updates to make things clearer for taxpayers:
- Table 12 in GSTR-1 is now split into two separate sections—one for B2B and another for B2C.
- For B2B, HSN details are required and system-validated.
- For B2C, HSN codes are optional (if turnover is ≤ ₹5 crore) and no validation checks will be applied.
Who Needs to Report HSN Codes and When?
Annual Turnover | Type of Supply | HSN Code in Invoice | HSN Entry in GSTR-1 |
Up to ₹5 crore | B2B (to registered) | Mandatory | Mandatory |
Up to ₹5 crore | B2C (to unregistered) | Optional | Optional |
Above ₹5 crore | B2C (to unregistered) | Mandatory | Mandatory |
This table helps you understand whether you’re required to include HSN codes in your invoices and GSTR-1 filings based on your turnover and the type of customer.
Post-Update: How the GST System Works
GSTR-1 Section | Supply Type | HSN Code Requirement | System Validation |
B2B | Registered Buyers | Mandatory | Yes |
B2C | Unregistered Buyers | Optional (≤ ₹5 crore) | No |
This change reduces filing errors for small businesses and streamlines the process.
How Expert Mantra Helps You Stay Compliant
GST return filing can feel complicated, especially when updates like these roll out. Expert Mantra is designed to simplify compliance:
- Auto-detects your turnover and whether HSN codes are needed
- Validates entries for B2B and B2C transactions before filing
- Prevents errors with intelligent auto-fill features
- Notifies you of new GST rules and CBIC clarifications
Whether you’re a retailer or a wholesaler, Expert Mantra helps you file GSTR-1 with ease and accuracy.
Conclusion
This clarification from CBIC clears the air on HSN code requirements in GSTR-1 filings.
- For businesses with turnover up to ₹5 crore, you now have flexibility for B2C supplies—no need to include HSN codes.
- However, for B2B supplies, HSN codes remain mandatory across the board.
As GST regulations evolve, using the right tools can save you from penalties and rejections.
FAQs
- What is an HSN code and why is it needed?
HSN (Harmonized System of Nomenclature) codes are used to classify goods for tax purposes and ensure uniformity in reporting. - Do I need to mention HSN codes on all invoices?
Only for B2B invoices. B2C invoices can skip HSN codes if your turnover is ≤ ₹5 crore. - What if I don’t fill in HSN codes for B2C in GSTR-1?
If you’re eligible (turnover ≤ ₹5 crore), leaving it blank is allowed. No system errors will be triggered. - Can I still include HSN codes for B2C if I want to?
Yes. It’s optional, so you can add them if you prefer—for recordkeeping or future needs. - Does this apply to service providers too?
Yes, the same rule applies to goods and service providers alike. - How can I check if my turnover is under ₹5 crore?
Refer to your financial records for the previous financial year or consult your accountant. - What if I forget to mention HSN for a B2B invoice?
The GSTN system will not let you file the return until it’s corrected.
