HSN and SAC Codes explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Harmonized System of Nomenclature (HSN) codes are internationally standardized commodity description and coding system. Under GST, HSN codes classify goods while Services Accounting Code (SAC) classifies services. Correct classification is critical for determining the applicable GST rate.
What is HSN?
HSN (Harmonized System of Nomenclature) was developed by the World Customs Organization (WCO) and is used internationally for customs classification. India uses an 8-digit HSN code under GST:
- First 2 digits: Chapter (broad category)
- Next 2 digits: Heading (subcategory)
- Next 2 digits: Sub-heading
- Last 2 digits: National sub-heading (India-specific)
Mandatory HSN Disclosure in Invoices
| Annual Turnover (PY) | HSN Digits Required | Invoice Requirement |
|---|---|---|
| Up to Rs.5 crore | 4 digits (B2B) / optional (B2C) | 4-digit HSN on all B2B invoices |
| Above Rs.5 crore | 6 digits (B2B) | 6-digit HSN on all B2B and B2C invoices |
| Export invoices | 8 digits (always) | 8-digit HSN mandatory on all export invoices |
GSTR-1 HSN Summary
Table 12 of GSTR-1 requires disclosure of HSN-wise summary of outward supplies:
- Aggregate value exceeding Rs.5 lakh per HSN code must be reported
- Taxpayers above Rs.5 crore: must report all HSN codes
- Must mention: HSN code, description, total taxable value, IGST/CGST/SGST/cess
- From 2023: GSTR-1 Table 12 made mandatory even for smaller taxpayers
Key HSN Chapters
| Chapter | Goods | Rate |
|---|---|---|
| 01-05 | Live animals, animal products | Nil/5% |
| 06-14 | Plants, vegetables, fruits | Nil/5%/12% |
| 28-38 | Chemicals, pharmaceuticals | 5%/12%/18% |
| 50-63 | Textiles and textile articles | 5%/12% |
| 84-85 | Machinery, electrical equipment | 18%/28% |
| 87 | Vehicles (cars, motorcycles) | 28% + Cess |
SAC Codes for Services
Services Accounting Codes (SAC) are 6-digit codes prescribed by CBIC (under GST rate notification) for classifying services. All SAC codes start with 99:
| SAC Range | Service Category |
|---|---|
| 9954 | Construction services |
| 9961-9962 | Wholesale and retail trade services |
| 9971 | Financial and related services |
| 9983 | Professional, technical services |
| 9985 | Support services (BPO, security, cleaning) |
| 9992 | Education services |
| 9993 | Health and social care services |
Consequence of Wrong HSN Classification
Incorrect HSN/SAC classification can lead to:
- Wrong tax rate applied — shortfall taxable as unpaid tax with interest at 18%
- Penalty under Section 122: Rs.10,000 or 10% of tax, whichever is higher, per wrong classification
- ITC reversal if recipient classified incorrectly and claimed ITC at higher rate
- Litigation and demands during scrutiny or audit
Advance Ruling for HSN Classification
Taxpayers uncertain about correct HSN/SAC can apply to the Authority for Advance Ruling (AAR) before beginning supply. AAR ruling is binding on applicant. However, multiple contradictory AAR rulings across states create uncertainty in many classification issues.
Key Facts About HSN and SAC Codes
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
How many digits of HSN code are mandatory on invoices?
Taxpayers with annual turnover up to Rs.5 crore must mention 4-digit HSN on B2B invoices. Those with turnover above Rs.5 crore must use 6-digit HSN on all invoices. Export invoices always require 8-digit HSN codes regardless of turnover.
What is SAC code and how is it different from HSN?
SAC (Services Accounting Code) classifies services under GST, while HSN classifies goods. All SAC codes are 6 digits and begin with 99. SAC codes are used on invoices for services and in GSTR-1 service disclosures.
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
HSN and SAC Codes: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.
Related Services & Guides
Why This Matters
Staying compliant with Indian regulations protects your business from penalties, interest and unnecessary legal trouble. It is always wise to maintain proper records and documentation so that any future scrutiny can be handled smoothly.