How to identify the correct HSN code for footwear
Here are a few key points that help you identify the correct HSN code with close attention to the material, type, and purpose:
Material composition: HSN codes differ based on whether the footwear is made from rubber, leather, textile, or other synthetic materials such as plastic.
Footwear type: The HSN code varies based on the type of footwear such as between sports shoes, sandals, slippers, and waterproof footwear.
Purpose and classification: Some HSN codes specifically address shoes with protective features such as metal toe caps, or parts such as removable insoles and heels.
Common errors in HSN code classification and how to avoid them
Using the wrong HSN code is a frequent issue that leads to tax discrepancies and penalties. Here is how to avoid some of the most common mistakes:
Material overlap: When footwear contains multiple materials, choose the code based on the outer sole and upper material.
Incorrect product grouping: Grouping sports footwear or specialised footwear incorrectly is a common error. Always verify the product specifications.
Overlooking code updates: Regular updates occur in HSN code classifications so stay informed on any changes by consulting the latest tax notifications.
Compliance and documentation for footwear HSN codes
Proper compliance with HSN codes ensures accurate tax filings and smooth customs processes. Here is a checklist for essential documentation that you must have to simplify this process:
GST filing requirements: Footwear businesses must submit GSTR-1 for sales, GSTR-3B for comprehensive tax payment, and GSTR-9 for annual returns.
Invoicing accuracy: Include HSN codes on invoices for transparency, particularly for footwear with different tax rates.
Audit and reconciliation: Large turnover businesses, those that exceed Rs. 5 crore, need to reconcile financials with GSTR-9C to avoid any discrepancies.
How GST impacts footwear
The new gst rate structure consolidates mass-market footwear into the lower 5% slab and raises the value ceiling for this benefit from Rs. 1,000 to Rs. 2,500.
Category (Price per Pair)
|
Old GST Rate (Current/Till 21 Sept 2025)
|
New GST Rate (Effective 22 Sept 2025)
|
Impact/Note
|
Handmade Footwear
|
Nil
|
Nil
|
No Change.
|
Footwear not exceeding Rs. 2,500
|
12%/18%
|
5%
|
Cheaper: Most mass-market footwear, especially those priced between Rs. 1,000 and Rs. 2,500, will see a significant tax reduction from 18% to 5%.
|
Footwear exceeding Rs. 2,500
|
18%
|
18%
|
No Change.
|
In terms of tax returns, footwear businesses must file the following:
GSTR-1: To report sales details
GSTR-3B: To summarise purchases and sales
GSTR-9: For annual returns
GSTR-9C: For large businesses with turnover above Rs. 5 crore
Conclusion
Accurate HSN code classification simplifies tax processes and enables smooth trade operations for businesses in the footwear sector. Proper tax planning and documentation practices go a long way in optimising costs and ensuring regulatory adherence. Moreover, businesses in need of expansion can also consider applying for a business loan to support growth amidst changing tax regulations.
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