In April and May 2025, the GST Network (GSTN) rolled out several critical updates to the GSTR-1 filing system. These changes focus on stricter HSN code validation, dropdown-based code selection, and PAN-level monitoring, aiming to improve GST return accuracy and reduce input tax credit (ITC) mismatches. This guide explains the new compliance rules and what businesses must do to avoid filing errors.
Table of Contents
- What is GSTR-1?
- Key Changes Effective April & May 2025
- Mandatory HSN Validation
- Dropdown-Based HSN Code Selection
- Auto-Population in Table 12
- PAN-Level HSN Monitoring
- Impact on Taxpayers
- Tips to Ensure HSN Compliance
- HSN Reporting: B2B vs. B2C Supplies
- Frequently Asked Questions (FAQs)
- Conclusion
What is GSTR-1?
GSTR-1 is a GST return that must be filed monthly or quarterly by registered taxpayers. It includes invoice-level details of outward supplies (sales) of goods or services. Accuracy in GSTR-1 filing is vital because:
- It directly feeds into GSTR-2A and GSTR-2B, which are used by recipients to claim ITC.
- Errors can lead to ITC rejections, notices, or penalties.
- It affects your overall GST compliance rating.
Key Changes Effective April & May 2025
1. Mandatory HSN Code Validation (From April 1, 2025)
The GST portal now validates HSN codes during GSTR-1 filing based on the taxpayer’s aggregate turnover:
| Aggregate Turnover (FY) | Minimum HSN Digits Required |
|---|---|
| Up to ₹5 crore | 4-digit HSN |
| Above ₹5 crore | 6-digit HSN |
If incorrect HSN codes are entered, the return will not be accepted.
2. Dropdown-Based HSN Code Selection (From May 2025)
A new dropdown search tool will allow users to:
- Select HSN codes from an auto-suggestive list
- Choose from previously used codes
- Minimize manual typing errors
Initially, this feature is optional but is expected to become mandatory soon.
3. Auto-Population in HSN-Wise Summary (Table 12)
Table 12 will now:
- Auto-fill from invoice data
- Auto-check UQC (Unit Quantity Code) and taxable value mismatches
- Prevent submission if inconsistencies are found
4. PAN-Level HSN Monitoring
GSTN will now monitor HSN code consistency across all GSTINs under the same PAN. Mismatches between branches or states may lead to:
- System-generated alerts
- Scrutiny notices
- Possible demand notices if ITC inconsistencies arise
Impact on Taxpayers
| Area | What’s Changing | What You Need to Do |
|---|---|---|
| HSN Validation | Format enforced based on turnover | Validate master data and invoice-level HSN codes |
| Filing Interface | Dropdown-based HSN selection | Use suggestions and avoid manual input errors |
| Summary Table | UQC and value checks | Review tax rates, units, and values before filing |
| Multiple Branches | PAN-level scrutiny of HSNs | Maintain uniform classification across all GSTINs |
Tips to Ensure HSN Compliance
- Validate master HSN codes based on turnover category
- Use official tools like CBIC’s HSN Lookup or GST-integrated software
- Avoid outdated, placeholder, or invalid codes
- Reconcile UQC and taxable values in your ERP
- Train billing and invoicing teams on HSN usage and dropdown selection
- Revisit invoice templates and software configuration
HSN Reporting: B2B vs. B2C Supplies
B2B (Business-to-Business) Supplies
- HSN codes must be reported invoice-wise in Table 12
- Incorrect or missing HSNs will block submission
- Directly affects the recipient’s ability to claim ITC
B2C (Business-to-Consumer) Supplies
- For businesses with turnover above ₹5 crore, HSN summary reporting is mandatory
- Even though the customer’s GSTIN isn’t captured, incorrect codes can still trigger compliance red flags
Returns with invalid or non-standard HSNs will be rejected by the portal.
Frequently Asked Questions (FAQs)
Q1: Is dropdown HSN selection mandatory?
No. From May 2025, it is optional for now, but expected to become mandatory in future updates.
Q2: What happens if I enter an incorrect HSN?
The return will be rejected until the correct HSN code is entered.
Q3: How do I find the correct HSN code for my goods/services?
Use the CBIC HSN finder, earlier GSTR-1 filings, or refer to customs/GST schedules.
Q4: Are these changes applicable to GSTR-3B?
No direct changes in GSTR-3B, but mismatch with GSTR-1 may lead to ITC reconciliation issues.
Q5: Will small taxpayers be impacted?
Yes. Even taxpayers with turnover up to ₹5 crore must report valid 4-digit HSN codes.
Conclusion
The latest GSTR-1 filing updates for FY 2024–25 underline the GSTN’s commitment to improving tax data integrity. These changes around HSN validation and dropdown selection demand that businesses:
- Update ERP systems and billing tools
- Clean up product/service master data
- Ensure consistent reporting across GSTINs under the same PAN
- Educate finance, billing, and compliance teams
Proactive compliance with these GSTR-1 changes will minimize return rejections and ITC mismatches, ensuring a smoother GST compliance process for all stakeholders.
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