GSTN Update: Separate HSN-Wise B2B and B2C Reporting in GSTR-1 Mandated

The Goods and Services Tax Network (GSTN) has brought forth an update to regulatory compliance, now requiring separate reporting of Harmonized System of Nomenclature (HSN) codes for Business-to-Business (B2B) and Business-to-Consumer (B2C) transactions in Table 12 of GSTR-1 and GSTR-1A.

The update has been promoted on the basis of the mandate by the Central Board of Indirect Taxes and Customs (CBIC) mandate under Rule 59 of the Central Goods and Services Tax (CGST) Rules, 2017, and is another indication of the continued attempts made by the GST Council to enforce high-value supply tracking and real-time invoice-level compliance.

By segregating HSN reporting for B2B and B2C transactions, the GSTN aims to enhance the accuracy of tax filings and ensure that businesses adhere to standardized reporting practices.

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Who All Should Comply?

Effective from the May 2025 return period, all registered taxpayers filing GSTR-1 or GSTR-1A are required to comply with this new mandate.

Taxpayers having an Aggregate Annual Turnover (AATO) up to ₹5 crore must report a minimum of 4-digit HSN codes, while those with AATO exceeding ₹5 crore are required to report a minimum of 6-digit HSN codes.

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Manual entry of HSN codes is no longer permitted. Taxpayers may now select the appropriate HSN codes from a dropdown list provided on the GST portal that contain all the specifics, thus eliminating discrepancies and ensuring standardized reporting across the GST system.

How Should Businesses Prepare?

In order to comply with the new regulations, business entities should update their accounting and Enterprise Resource Planning (ERP) systems to accommodate the new reporting format.

It is important that internal teams are informed of and provided training on the updated procedures to avoid errors during the filing process. Additionally, businesses should validate their HSN data against the codes available in the master list  on the GST portal to ensure compliance.

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Steps to Follow:

• Taxpayers must navigate to Table 12 of GSTR-1 or GSTR-1A, which is now divided into separate sections for B2B and B2C transactions. In each section, HSN codes must be selected from a dropdown menu provided on the GST portal, which will then auto-fill the corresponding product description.
  
• Validation Mechanism for B2B: The GSTN will validate the total value reported under the B2B section of Table 12 against multiple tables including 4A, 4B, 6B, 6C, 8 (registered recipients), 9A, 9B, 9C, 15, and 15A to ensure data consistency across the return.
  
• Validation Mechanism for B2C: For B2C transactions, the portal shall validate by cross-checking the values reported in Table 12 against those in Tables 5A, 6A, 7A, 7B, 8 (unregistered recipients), 9A (exports and B2CL), 9B, 9C, 10, 15, and 15A.
  
• As of now, these validations operate in “warning mode,” where the system flags inconsistencies without blocking return filing. However, in the coming months, GSTN is expected to tighten enforcement in phases, potentially flagging or disallowing filings with discrepancies.

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Date of Implementation

The effective date for the implementation of this mandate is the May 2025 return period, with filings due in June 2025. Taxpayers are expected to adhere to the new reporting requirements from this period onwards to ensure compliance and avoid inadvertent penalties.

All things considered, the latest GSTN mandate for separate HSN-wise B2B and B2C reporting in GSTR-1 and GSTR-1A is a significant step towards enhancing the accuracy and reliability of GST filings.

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