Rate Difference HSN Code for GST Filing
Rate difference entries arise when there is a change in the value of supply due to price revision, discount adjustment or change in GST rate. Understanding how rate difference is treated for HSN code and GST helps businesses pass correct credit or debit notes and avoid confusion in returns.
What Is Rate Difference in HSN Code Classification?
Rate difference by itself is not a separate product or service. It is an adjustment that is linked to an earlier supply of goods or services. Because of this, there is usually no independent HSN code only for rate difference.
In practice, rate difference is documented through credit notes or debit notes that refer back to the original tax invoice. The HSN code that was used for the original supply is also considered for the rate difference adjustment.
| HSN Code | Product name | Product description | GST rate |
|---|---|---|---|
| 9997 | Rate difference adjustment | Adjustment in value of supply due to price or rate revision linked to original goods or services | Same as original supply GST rate |
| 9997 | Post sale discount or revision | Credit or debit note issued for change in value of an earlier invoice | Same as original supply GST rate |
How Does GST Rate Difference Affect HSN Code Classification?
When GST rate or price changes after an invoice is issued, the adjustment is done through a credit note or debit note under GST law. The HSN code remains the same as the original supply, but the taxable value and tax amount are adjusted to reflect the difference.
Businesses should ensure that every rate difference note clearly mentions the original invoice number, date and HSN code so that both parties can match the entries in their returns. This also helps during reconciliation of GSTR two B and books of account.
Why Is Rate Difference Crucial for GST Filing and HSN Code?
Correct treatment of rate difference ensures that GST liability is neither understated nor overstated. If rate difference is not recorded properly, the supplier may pay excess tax or the recipient may claim excess input tax credit, both of which can invite notices.
Since rate difference usually follows the same HSN code as the underlying supply, maintaining a clear link between documents is essential. This helps tax officers trace the flow from original invoice to the credit or debit note during audits.
How to Account for Rate Difference in HSN Code for GST Returns?
In accounting software, rate difference for a sale is usually recorded through a separate voucher type but tagged to the same customer and the same HSN code as the original item. The impact then flows automatically to GSTR one through the credit or debit note sections.
Taxpayers should verify that all rate difference notes are correctly reported in the appropriate table of GSTR one and that the corresponding impact is visible to the recipient through GSTR two B. Regular reconciliation reduces the risk of disputes over tax amounts and credits.
Conclusion
Rate difference is an important adjustment concept in GST rather than a separate HSN classification. It normally follows the HSN code and GST rate of the original supply and is implemented through credit or debit notes. Clear documentation and correct linking of these notes to original invoices help businesses stay compliant and avoid interest or penalties.
Jagdish Prasad is a Chartered Accountant with over 5 years of experience. He helps people and businesses with GST, income tax, and HSN codes. Jagdish makes sure his clients follow all tax rules and save money the right way. He also enjoys writing simple articles to help others understand taxes and stay updated with the latest rules.
Frequently Asked Questions
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What is the rate difference HSN code?
There is no independent HSN code only for rate difference. Rate difference is usually adjusted through a credit note or debit note using the same HSN code as the original goods or services.
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How does the GST rate difference affect HSN code classification?
GST rate difference does not change the HSN code. Instead, it changes the taxable value and tax amount on the original classification, which is reflected through the adjustment documents.
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Are there specific cases for rate difference in HSN codes for GST?
Special cases arise when the government changes GST rates with effect from a particular date. Suppliers may then need to issue rate difference notes for supplies that were taxed at the old rate but accounted later at the new rate.
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How do I handle rate differences in HSN code for GST returns?
You should issue proper credit notes or debit notes that mention the original invoice details and HSN code. These notes should be uploaded in GSTR one so that the impact flows to the recipient through their input tax credit statement.
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Can rate differences impact the overall GST liability?
Yes, rate differences directly impact GST liability because they increase or decrease the taxable value or tax amount. If they are not recorded correctly, it can lead to short payment or excess payment of GST and possible interest exposure.