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HSN Codes – What They Are and How to Create Them

HSN (Harmonized System of Nomenclature) Codes are used to classify goods and services for tax reporting. They ensure that services are consistently categorized on invoices and aligned with regulatory requirements

 

 

Why It Matters

  • Compliance: Required in certain tax frameworks (e.g., GST)

  • Consistency: Standardizes service descriptions across invoices

  • Reporting: Supports accurate tax filings and audits

How HSN Codes Are Used

HSN Codes can be:

  • Assigned to client invoices

  • Set as a default for billing

  • Used to standardize how services are described

They work alongside Tax Codes:

  • Tax Codes → control how tax is calculated

  • HSN Codes → define what the service is

 

How to Create an HSN Code

Step 1: Navigate

Go to:
Set Up Files → Tax Codes → HSN Codes

Click New HSN

Enter Details

  • HSN Code

    Enter the classification code (e.g., 998361)

  • Service Description

    Add a clear description (e.g., Advertising Services)

  • Default for Client Invoice (Optional)

    Select this if you want this code to automatically appear on client invoices

Click Save

Your HSN Code will now appear in the list and can be used on invoices.

Best Practices

  • Use clear, standardized descriptions

  • Only set one default HSN Code unless required

  • Align HSN Codes with your Tax Codes for accurate reporting