New GSTR-1 Filing Glitch: B2B HSN Code Mandatory, Creating Issues for B2C Businesses

A recent update to the Goods and Service Tax Network (GSTN) GSTR-1 return form has created a hurdle for many GST-registered taxpayers, particularly those dealing only in Business-to-Consumer (B2C) sales. An advisory tweet from GSTN clarified that B2B (Business-to-Business) supply information and HSN (Harmonised System of Nomenclature) codes in Table 12 of the GSTR-1 return are now mandatory for filing, while B2C details remain optional. This change, effective for the May 2025 tax period with a filing deadline of June 11, 2025, is preventing businesses with no B2B sales from submitting their returns. 

The Problem for B2C-Only Businesses 

The issue arises because the GST system requires HSN code details for B2B supplies in Table 12. For taxpayers who exclusively sell to end consumers (B2C) and have no B2B transactions, this B2B HSN column is naturally blank. However, the system's current validation process does not allow them to file their GSTR-1 if this mandatory B2B HSN field is empty. 

GSTN acknowledged this in a June 7, 2025, tweet, stating that "the GST system is only validating the values in Table -12 of GSTR-1 concerning the B2B table which is mandatory." They confirmed that the B2C table in Table 12 can be left empty or filled with any numerical value as it is not mandatory. 

CBIC Clarifies HSN Rules, But Glitch Persists 

The Central Board of Indirect Taxes & Customs (CBIC) also weighed in on June 10, 2025, reiterating existing rules. CBIC highlighted that businesses with an annual turnover up to ₹5 crore in the previous financial year are not required to mention HSN codes in invoices issued to unregistered persons (B2C supplies), as per Notification No. 12/2017-Central Tax.  

They clarified that because HSN codes for B2C supplies are optional for these businesses, the system does not enforce the mandatory filling of the B2C HSN table. However, this does not resolve the core problem of the mandatory B2B HSN field being blank for B2C-only businesses. 

Impact on Buyers and a Temporary Solution 

This GSTR-1 filing glitch has a ripple effect. If sellers cannot file their GSTR-1 returns on time, buyers will face delays in claiming their Input Tax Credit (ITC) for the May 2025 tax period. This is because the seller's GSTR-1 data is crucial for auto-populating the buyer's GSTR-3B form, which is used for claiming ITC. 

For now, a temporary workaround has emerged. If you are a taxpayer with no B2B sales, you should enter "0" (zero) in the HSN column of the B2B section in Table 12 before filling your B2C data. This "makeshift solution" allows the system to validate the return and enables successful filing. For persistent issues, taxpayers can contact the GSTN helpdesk. 

Read more: Major Changes in GST Returns Coming: File on Time or Lose Out! 

Conclusion 

The new mandatory B2B HSN reporting in GSTR-1, while intended to improve data accuracy, has inadvertently created a challenge for businesses exclusively dealing in B2C sales. Businesses are encouraged to use the "zero" entry method for B2B HSN if they have no B2B supplies, until a permanent solution is implemented by GSTN. 

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