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GST Compliance is changing – Are you Ready?
The GST ecosystem in India is evolving once again, this time with a decisive shift towards standardization, automation, and stringent data reporting. Effective from 1st April 2025, businesses and professionals will face two critical changes in GST returns:
- Mandatory 6-digit HSN code reporting in Form GSTR-1.
- Auto-population of outward supplies in GSTR-3B from GSTR-1 with no scope for manual overrides.
These changes are part of the Government’s continuing effort to bring greater transparency, traceability, and consistency into the indirect taxation system. In this detailed article, we decode the legal basis, impact, risks, and actionable for businesses, accountants, and tax professionals.
Legal Basis for the Changes
A. Mandatory 6-Digit HSN Code reflect in GSTR-1
As per the amendment notified under Notification No. 78/2020 – Central Tax, dated 15th October 2020, read with Rule 46(g) of the CGST Rules, 2017, the requirement for quoting HSN codes was made applicable based on turnover slabs.
With effect from April 2025, the following change is notified:
- All taxpayers with turnover exceeding ₹5 crore in the preceding financial year must now mandatorily report 6-digit HSN codes for all outward supplies in GSTR-1, including both B2B and B2C transactions.
This change may soon be formalized via a Notification under Section 164 of the CGST Act, 2017.
B. Auto-Population of GSTR-3B from GSTR-1
This change stems from the Government’s broader roadmap towards seamless return filing, first outlined in the 45th GST Council Meeting and pilot-tested via the GSTR-2B system.
Now, the mechanism is being extended to auto-populate the outward supply details in GSTR-3B from GSTR-1, making GSTR-1 the source document.
Implication: Any error or omission in GSTR-1 will directly reflect in GSTR-3B, with no option to edit GSTR-3B unless it is corrected at source in GSTR-1.
Understanding the Changes
1. Mandatory 6-Digit HSN Code Reporting in GSTR-1
Applicability:
- Businesses with aggregate turnover > ₹5 crore in the preceding financial year.
Requirement:
- 6-digit HSN code must be reported for each line item in all outward supply invoices.
Earlier Provision:
- 4-digit HSN was allowed in some cases under earlier guidelines.
Now:
- 4-digit HSN is no longer permitted where the threshold exceeds ₹5 crore.
Legal Implications:
- Non-compliance can lead to:
- Mismatch of returns
- Blocking of ITC for the recipient (under Section 16(2))
- Possible penalties under Section 125 of the CGST Act
- Audit scrutiny and system-generated notices
Benefits to the Department:
- Improved classification and analytics
- Detection of underreporting and tax evasion
- Better alignment of supply chain data
2. Auto-Population of GSTR-3B from GSTR-1
Key Points:
- Data from GSTR-1 will automatically be used to populate GSTR-3B, particularly for Table 3.1(a) – Outward taxable supplies.
- No manual intervention is allowed in GSTR-3B if the value does not match with GSTR-1.
Risk Involved:
- Any inadvertent error in GSTR-1 (e.g., incorrect taxable value, HSN, tax rate) will flow into GSTR-3B.
- Mistakes in GSTR-3B may lead to:
- Short payment of tax
- Interest liability under Section 50
- Show-cause notices under Section 73/74
Key Practical Implications
For Tax Professionals and Chartered Accountants:
- Review and update client HSN codes in ERP/software.
- Implement internal checks for accuracy before GSTR-1 submission.
- Educate clients that GSTR-1 errors can no longer be fixed in GSTR-3B.
- Maintain documentation trail for defensible audit preparation.
For Businesses:
- SKU-wise mapping of HSN codes with proper validation.
- Automation of data upload from ERP to GSTN through API integrations.
- Training staff on updated return filing procedures and risks.
- Segregating B2B/B2C invoices correctly with accurate HSN usage.
Common Questions (FAQs)
Q1: Can businesses below ₹5 crore turnover continue using 4-digit HSN?
Yes, as per the existing structure. However, voluntary use of 6-digit HSN is advisable to prepare for future expansion or scrutiny.
Q2: Will GSTR-3B allow any changes post auto-population?
No. GSTR-3B will lock outward supply values based on GSTR-1. Corrections must be made in GSTR-1 before re-filing.
Q3: Can I amend the wrong or incomplete HSN code?ce
Yes, you can amend the invoice in the subsequent month GSTR-1 or you can file the GSTR-1A in the same month after 11th but before filling GSTR 3B. However, the correction must be accurately reported to avoid cumulative mismatches.
Legal Reference Table
Legal Provision | Description |
Section 37 of CGST Act | Furnishing details of outward supplies in GSTR-1 |
Section 39 of CGST Act | Filing summary return in GSTR-3B |
Rule 46(g) of CGST Rules | Mandatory HSN disclosure |
Section 50 | Interest for late payment |
Section 73/74 | Demand and recovery for incorrect tax reporting |
Notification No. 78/2020-Central Tax | HSN Code usage requirements |
Expert Analysis: Why These Changes Matter
The convergence of GSTR-1 and GSTR-3B filing reflects the government’s commitment to minimizing human error, curbing fake invoicing, and enabling real-time data analytics. While the move improves compliance and eases reconciliation for the department, it increases the burden of accuracy for taxpayers.
These changes demand more robust processes, trained manpower, and technological adaptation. Professional judgment, internal controls, and risk mitigation strategies will be more important than ever before.
Final Thoughts
As a GST professional or business owner, now is the time to:
- Revisit your classification codes
- Streamline your ERP-GSTN sync
- Empower your team through compliance training
- Invest in data automation and validation
GST compliance is no longer a formality—it’s a system-driven, precision-based process that leaves little room for error. Staying ahead of these changes will not only ensure compliance but also help avoid future litigation and financial risks.
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