HSN Code for Textile Yarn, Thread & Cotton Products: A Comprehensive Guide for Indian Businesses

As a textile business owner in India, you juggle everything from sourcing raw materials to sales. But when it comes to GST filing, one small detail can cause big problems: the HSN code. Are you confident you’re using the right HSN code for textile yarn for your products? This single code determines your GST rate, affects your ability to claim input tax credit, and ensures your goods move smoothly across state lines. Using the wrong one can lead to tax notices, penalties, and unnecessary headaches.

The HSN, or Harmonized System of Nomenclature, is a globally recognized method of classifying goods for trade and taxation. In India, it’s the backbone of the GST system. This comprehensive guide will simplify the process of identifying the correct HSN code for textile yarn, thread, and various cotton products. We will break down the HSN classification for textiles to ensure your business remains compliant, avoids penalties, and manages its tax obligations with confidence. Understanding the HSN code textiles India structure is the first step towards mastering your GST compliance.

Understanding HSN Codes and Their Importance in the Textile Industry

Before diving into specific codes, it’s crucial to understand what they are and why they are so fundamental to your business operations. An HSN code isn’t just a number; it’s a key that unlocks correct tax calculation, seamless logistics, and legal compliance. For the diverse and complex textile industry, this system brings much-needed uniformity and clarity, helping both businesses and tax authorities speak the same language. Getting this right from the start saves immense time, money, and effort in the long run.

What Exactly is an HSN Code?

The HSN code is a systematic classification of products developed by the World Customs Organization (WCO). While it’s a six-digit code globally, India uses an eight-digit structure for more precise classification. This structure is hierarchical:

Chapters (First 2 digits): Broad categories of products. For instance, textile articles fall under Section XI, which covers Chapters 50 to 63.
Headings (First 4 digits): A more specific grouping within a chapter. For example, Chapter 52 is for Cotton, and heading 5205 is for certain types of cotton yarn.
Sub-headings (First 6 digits): A further detailed classification of the products under a heading.
Tariff Items (All 8 digits): This is the most specific classification used in India for determining tax rates and other trade policies.

The primary purpose of this system is to create a universal economic language and code for goods, facilitating international trade, collecting statistics, and ensuring uniform application of taxes like GST.

Why Correct HSN Classification is Non-Negotiable

For any business in the textile sector, using the correct HSN code is not optional—it’s a legal requirement with significant financial implications. Here’s why it’s so critical:

Accurate GST Rates: The HSN code is directly linked to the GST rate applicable to your product. A yarn might attract a 5% GST rate, while a finished garment could be taxed at 12%. Using the wrong code could mean you either overpay tax, hurting your cash flow, or underpay it, leading to future liabilities with interest.
Seamless Input Tax Credit (ITC): To claim ITC on your raw materials (like yarn, dyes, or machinery), the HSN code on your supplier’s invoice must match the goods you received. Similarly, your B2B customers need the correct HSN on your invoices to claim their ITC. Mismatches can cause delays and disputes in the ITC chain. Correct invoicing is so important that we have a full post on Understanding GST Invoicing: A Detailed Guide.
Avoiding Penalties: Misclassification of goods, whether intentional or not, can attract scrutiny from tax authorities. This can lead to penalties under GST law, along with the burden of paying the differential tax plus interest.
Smooth Logistics: HSN codes are mandatory for generating e-way bills for the transportation of goods valued over ₹50,000. An incorrect code can cause delays at checkpoints and disrupt your supply chain. Our Guide to GST E-Way Bill Generation provides a detailed walkthrough of this process. For businesses involved in exports or imports, the HSN code is a non-negotiable part of customs documentation.

A Detailed Guide to the HSN Code for Textile Yarn

Finding the correct HSN code for textile yarn is one of the most common challenges for businesses. The classification primarily depends on the composition of the yarn—whether it’s made from natural fibres like cotton or wool, or man-made fibres like polyester. The HSN system dedicates specific chapters to different raw materials, making it a logical starting point for your search. Understanding this chapter-wise distribution is key to achieving accurate textile yarn classification India.

Navigating HSN Chapters for Different Yarn Types

The HSN nomenclature organizes textile yarns into different chapters based on their primary raw material. This initial sorting is the most important step in pinpointing the exact code for your product. A quick overview of the key chapters will help you narrow down your search immediately:

Chapter 50: Silk – This chapter covers everything from silkworm cocoons to silk yarn and woven fabrics of silk.
Chapter 51: Wool – This includes fine or coarse animal hair, and yarn and fabric made from wool.
Chapter 52: Cotton – This is one of the most widely used chapters, covering raw cotton, cotton waste, and various types of cotton yarn and sewing thread.
Chapter 54: Man-made Filaments – This chapter deals with synthetic (like polyester, nylon) and artificial (like viscose rayon) filament yarns.
Chapter 55: Man-made Staple Fibres – This covers yarns spun from synthetic or artificial staple fibres, which are fibres of a predetermined length.

By first identifying the primary material of your yarn, you can directly go to the relevant chapter and significantly simplify the classification process.

Finding the HSN Code for Cotton Yarn (Chapter 52)

Cotton yarn is a staple for the Indian textile industry, and Chapter 52 is dedicated entirely to it. The classification within this chapter depends on factors like the percentage of cotton content, whether it’s sewing thread or other yarn, and if it’s prepared for retail sale. Understanding the cotton product HSN code is crucial for anyone dealing in these goods. Below is a simplified table for common thread and yarn HSN code India classifications under Chapter 52.

HSN Code	Description	GST Rate
5204	Cotton sewing thread, whether or not put up for retail sale	5%
5205	Cotton yarn (other than sewing thread), containing 85% or more by weight of cotton, not put up for retail sale	5%
5206	Cotton yarn (other than sewing thread), containing less than 85% by weight of cotton, not put up for retail sale	5%
5207	Cotton yarn (other than sewing thread) put up for retail sale	5%

This table clearly distinguishes between sewing thread (5204) and other yarns, further classifying them based on cotton purity (5205 vs. 5206) and packaging (5207).

HSN Codes for Other Common Yarns (Man-made, Wool, etc.)

Beyond cotton, Indian businesses deal with a vast array of other yarns. Man-made fibres, in particular, form a significant part of the market. Here are a few examples to illustrate the breadth of classification:

Synthetic Filament Yarn (Chapter 54): HSN Code 5402 is used for synthetic filament yarn (other than sewing thread), such as that made from polyester or nylon, not put up for retail sale.
Man-made Staple Fibre Yarn (Chapter 55): HSN Code 5509 covers yarn (other than sewing thread) of synthetic staple fibres, like polyester staple fibre yarn, not put up for retail sale.
Wool Yarn (Chapter 51): HSN Code 5107 is for yarn of carded wool, not put up for retail sale.

Each of these categories has further sub-classifications, but knowing the primary heading is a major step toward compliance.

HSN Codes for Thread Products and Finished Cotton Goods

While yarn is the primary raw material, many businesses deal in more specialized products like sewing thread or finished goods like garments and home textiles. The HSN system provides distinct classifications for these items, and it’s important to use the specific code rather than a general yarn code to ensure accuracy.

Identifying the HSN Code for Thread Products

For GST and customs purposes, ‘sewing thread’ is treated differently from ‘yarn’. Thread is specifically engineered for sewing, with properties like strength, twist, and finish that differ from yarn used for weaving or knitting. Therefore, it has its own dedicated HSN codes. If you manufacture or trade in sewing thread, using the general yarn codes would be incorrect. Here are the specific HSN codes for different types of sewing thread:

HSN 5204: This code is specifically for Cotton sewing thread.
HSN 5401: This covers sewing thread made of synthetic filaments, such as polyester or nylon thread.
HSN 5508: Use this code for sewing thread made of artificial staple fibres, like viscose rayon.

Using the correct HSN code for thread products is vital for accurate invoicing and tax payment.

Common HSN Code for Cotton Products in India

For businesses that have moved further down the value chain, dealing in finished or semi-finished goods, the HSN codes shift away from the raw material chapters (50-55) and into the chapters for finished articles (61, 62, 63). If you are a manufacturer or retailer of cotton-based finished products, you need to use these specific codes. Using a yarn HSN code for a finished shirt, for example, is a serious compliance error. Here are some common examples of the HSN code for cotton products India:

HSN 6302: This broad heading covers bed linen, table linen, toilet linen, and kitchen linen. This includes items like cotton bedsheets, towels, and tablecloths.
HSN 6205: This code is used for Men’s or boys’ shirts. If the shirts are primarily made of cotton, they fall under this classification.
HSN 6109: This covers T-shirts, singlets, and other vests, knitted or crocheted. A cotton T-shirt would be classified here.
HSN 4202: This chapter is for articles like trunks, suitcases, and bags. A handbag or shopping bag made of cotton textile fabrics would fall under a sub-heading of 4202.

Always check the detailed description of the HSN code to ensure it perfectly matches your finished product.

How to Find and Verify HSN Codes for Your Business

Knowing the structure is one thing, but confidently finding and verifying the right code for your specific product is another. Fortunately, there are official resources available. However, for complex products or when in doubt, guessing is never a good strategy.

Using the Official GST Portal

The official GST portal provides a handy tool to search for HSN codes. It’s the most reliable source for up-to-date information. Here is a simple, step-by-step guide:

Visit the official GST website: GST Portal
On the top menu, navigate to `Services` > `User Services` > `Search HSN Code`.
You can search either by the code itself or by the product description. To find a code, select the “Description” option.
Type in a keyword for your product, like “cotton yarn” or “polyester sewing thread,” and solve the captcha.
The portal will display a list of potential HSN codes along with their detailed descriptions. Carefully read the descriptions to find the one that most accurately matches your product.

This tool is invaluable for verifying codes and exploring classifications for new products.

When in Doubt, Seek Professional Help

The HSN system can be complex, especially for new, innovative, or blended textile products. Classifying a product incorrectly can lead to scrutiny from tax authorities and result in costly compliance issues, including interest and penalties. Guesswork is a risk your business cannot afford to take.

If you need clarity on textile yarn classification in India or require expert assistance with your GST filings, TaxRobo’s expert team is here to help. We can ensure accuracy, compliance, and peace of mind for your business. Contact us for an online CA consultation today!

Conclusion

In the intricate world of the Indian textile industry, the HSN code is a small but mighty detail. It dictates your GST rate, validates your Input Tax Credit claims, and ensures your business operations run smoothly and without legal hurdles. Taking the time to understand and correctly apply the HSN code for textile yarn, thread, and finished goods is a fundamental investment in your business’s financial health and long-term stability. This is a core part of Understanding GST Compliance: An Overview for Businesses. A proactive approach to compliance is always better than a reactive one.

Don’t let GST compliance slow you down. From company registration to meticulous GST filing and accounting, TaxRobo offers comprehensive, end-to-end solutions tailored for your business. Contact us today for a consultation and let our experts handle the complexities while you focus on growth!

Frequently Asked Questions (FAQs)

What is the GST rate on most textile yarn in India?

The GST rate for most types of yarn, including cotton and polyester yarn (falling under HSN Chapters 52, 54, 55), is currently 5%. However, GST rates are subject to change based on notifications from the GST Council. It is always advisable to verify the rate with the latest official GST notifications or consult a tax professional.

Is it mandatory for my small business to use an 8-digit HSN code?

As per the current rules, businesses with an annual aggregate turnover of over ₹5 crores must use a 6-digit HSN code on their invoices. Businesses with a turnover up to ₹5 crores are required to use a 4-digit code for B2B transactions. While an 8-digit code is not always mandatory for domestic transactions, it is required for all import and export documentation.

How do I find the HSN code for a blended fabric yarn (e.g., poly-cotton)?

For blended yarns or fabrics, the HSN classification is determined by the material that constitutes the majority by weight. For example, a yarn that is 60% cotton and 40% polyester would be classified under the relevant HSN code for cotton yarn in Chapter 52. If the blend was 60% polyester and 40% cotton, it would be classified under the codes for synthetic yarns in Chapter 54 or 55.

Where can I find the most reliable list of HSN codes?

The most reliable and official source for HSN codes is the CBIC (Central Board of Indirect Taxes and Customs) website and the HSN search tool available on the official GST Portal. These sources are regularly updated. For complex classifications or to ensure complete accuracy, consulting with a tax professional like the experts at TaxRobo is the best course of action.