HSN code on exempt goods/services and composition Dealer

Dear Friends, Nowadays it’s a big question that HSN/SAC code will be applicable on Exempt Goods / services, Composition registered person.

Let’s Discuss this Situation with the provision of Law.

Provision of Law

Notification No. 78/2020-Center tax Dated: 15/10/2020

Notification No. 12/2017- Central Tax Dated: 28/06/2017

According to Notification No. 78/2020-Center tax Dated : 15/10/2020 read with Notification No. 12/2017- Central Tax Dated : 28/06/2017 with excise of the powers conferred by the first proviso to rule 46 of the Central Goods and Services Tax Rules, 2017 HSN/SAC code will be applicable from 01/April/2021 on Tax Invoice.

Rule 46 provides a description of the Tax Invoices.

Rule 49 provides a description of the Bill of Supply.

Analysis Portion

According to notification No. 12/2017 HSN code will be applicable on Tax Invoice.

Tax Invoice is Referred U/S 31(1)

(1) A registered person supplying taxable goods shall, before or at the time of,—

(a) removal of goods for supply to the recipient, where the supply involves movement of goods; or

(b) delivery of goods or making available thereof to the recipient, in any other case, issue a tax invoice showing the description, quantity, and value of goods, the tax charged thereon and such other particulars as may be prescribed:

& according to sec 31(3)(b)& (c) tax invoice shall be not applicable on these cases:(b) a registered person may not issue a tax invoice if the value of the goods or services or both supplied is less than two hundred rupees subject to such conditions and in such manner, as may be prescribed;

(c) a registered person supplying exempted goods or services or both or paying tax under the provisions of section 10 shall issue, instead of a tax invoice, a bill of supply containing such particulars and in such manner, as may be prescribed:

Additional Points

My view.

The Government Main purpose behind this notification is to find out the rate & category of goods/services.

Rule 46 Tax invoice & Rule 49 Bill of Supply both rules required HSN/SAC code in Tax invoice & Bill of supply respectively.

because they want to know what is good/Service, what is the rate applicable to them. & whether goods/services are taxable or Exempt.

But in the notification, they only write about Tax Invoice & Tax invoice is not defined in GST. it’s only referred in Sec 31.

In my view, a Tax Invoice means an invoice in which a tax amount is provided.

Conclusion

My view

According to the above provision of law, HSN/SAC code will be applicable on the Tax Invoice and a tax invoice are issued in the case of taxable goods/services as per sec 31.

In the case of exempted goods/services or both & tax payable under the provisions of section 10 Bill of supply will issue, instead of a tax invoice.

So In the case of exempt goods/services & composition Supply, we are not legally bound to provide HSN/SAC Code But on the Safer side & in respect of Rule 49 bill of supply we should give the HSN/SAC code on a bill of Supply. otherwise, we will violate the provision of rule 49.

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Thanks For Your Precious & Valuable Time.

Disclaimer:- The above-referred analysis and views are purely my own view and in subjective nature so kindly take any decision and action with prior discussion and consulting with your Chartered Accountants/Advocates/Legal Consultant etc.