description: Find out why businesses with Aggregate Annual Turnover over Rs 5 crores need to provide a 6-digit HSN code in Table 12 of GSTR-1, while those with AATO up to Rs 5 crores only need to provide a 4-digit HSN code.

Businesses with AATO of more than Rs 5 Crores Need to Provide 6-digit HSN Code in Table 12 of GSTR-1

In the world of taxation and compliance, businesses are often faced with complex regulations and requirements. One such requirement for businesses operating in India is the need to provide Harmonized System of Nomenclature (HSN) codes in their Goods and Services Tax Return-1 (GSTR-1) filings. The HSN code is a globally recognized system for classifying goods in international trade. It is used to streamline the process of reporting goods and services for taxation purposes.

What is AATO and Why Does it Matter?

Aggregate Annual Turnover (AATO) is a crucial factor in determining the tax obligations of a business. In India, businesses with an AATO of more than Rs 5 crores are required to provide a 6-digit HSN code in Table 12 of their GSTR-1 filings. This detailed level of classification is necessary for the government to accurately levy taxes on different categories of goods and services.
On the other hand, businesses with an AATO of up to Rs 5 crores have a slightly less stringent requirement. They only need to provide a 4-digit HSN code in Table 12 of GSTR-1. This distinction is important as it ensures that smaller businesses are not burdened with the same level of reporting requirements as larger enterprises.

Why the Discrepancy in HSN Code Requirements?

The variance in HSN code requirements for businesses with different AATO levels can be attributed to the need for a balanced approach to taxation. Larger businesses typically deal with a wider range of goods and services, making it necessary to provide a more detailed classification with a 6-digit HSN code. This ensures that each product or service is correctly categorized for taxation purposes.
Smaller businesses, on the other hand, may have a more limited product or service offering, making a 4-digit HSN code sufficient for reporting purposes. This streamlined approach allows small businesses to comply with tax regulations without the added complexity of providing a 6-digit code for each item.

The Importance of Compliance

Compliance with tax regulations is essential for businesses of all sizes. By accurately reporting HSN codes in their GSTR-1 filings, businesses can avoid penalties and scrutiny from tax authorities. Additionally, proper classification of goods and services ensures that the correct amount of tax is levied, contributing to a fair and transparent tax system.
In conclusion, businesses with an AATO of more than Rs 5 crores need to provide a 6-digit HSN code in Table 12 of GSTR-1, while businesses with an AATO of up to Rs 5 crores only need to provide a 4-digit HSN code. This distinction is based on the complexity of the business operations and the need for accurate tax reporting. By adhering to these requirements, businesses can ensure compliance with tax regulations and contribute to a smooth functioning of the tax system.