The Goods and Services Tax Network (GSTN) will initiate Phase III of mandatory harmonized system of nomenclature (HSN) code reporting next month.

This move aims to enhance the accuracy and consistency of GST compliance, and analysts believe it will enable the creation of more detailed value-added reports, thereby aiding in the detection of tax evasion.

Starting from February 2025, taxpayers will need to report HSN codes in GSTR-1 and GSTR-1A forms by selecting the appropriate codes from a dropdown menu, as opposed to manually entering them. Table 12 will be divided into B2B and B2C tabs for separate reporting of supplies.

According to a GST portal advisory, “After the successful implementation of Phase-I and Phase-II, Phase-III regarding Table 12 of GSTR-1 and 1A is being implemented from the return period February 2025.”

The advisory also noted that new validations related to supply values and associated tax amounts will be introduced, though initially, these validations will only issue warnings and not block the filing of forms.

GSTR-1 is a statement of outward supplies furnished monthly or quarterly by all normal and casual registered taxpayers dealing in goods, services, or both. It contains detailed information on these supplies.

Taxpayers are required to report at least four or six digits of the HSN code in Table-12 of GSTR-1, depending on their aggregate annual turnover in the previous financial year.