ShopNxCollections and categories
A collection is a hand-picked group shown in your own order. A category is where a product sits in your catalogue, and each product has one.
Collections
Go to Products › Collections and press New collection. On its page, press Add products and drag them into order, which is the order your storefront shows them in. Then save. You choose the products yourself; a collection doesn't fill by rules.
Categories
Go to Products › Categories and press New category. Choose a Parent to nest it. A category can hold products and subcategories at once.
The HSN code goes on GST invoices for products in that category with no HSN of their own, and subcategories without a code use it too. Empty a category before deleting it.