HSN & SAC CODE

What is an HSN Code?

HSN stands for Harmonized System of Nomenclature. It’s a globally accepted method of classifying goods using a numeric code. Under GST, it helps in identifying what type of product is being sold.

Why is HSN Code used in GST?

HSN codes help determine the correct GST rate for goods. It also avoids confusion during billing, filing returns, and claiming input tax credit.

How is the HSN code structured?

HSN is an 8-digit code:

·       First 2 digits: Product category (e.g., iron & steel)

·       Next 2 digits: Product type (e.g., pipes)

·       Last 4 digits: Specific item (e.g., cast iron pipe)

Example: 73030010 is the HSN for cast iron pipes.

Do all businesses need to use HSN codes?

Not always. It depends on your annual turnover:

Note: Importers/Exporters – Must use 8-digit HSN

What is a SAC Code?

SAC stands for Service Accounting Code. It is like HSN but for services, not goods. Every service (e.g., renting property, consulting) has a 6-digit SAC code.

How is a SAC code structured?

·       First 2 digits: Always 99 (for services)

·       Remaining 4 digits: Specific service

Example: 997212 is the SAC for renting non-residential property.

Where do I need to mention HSN/SAC codes?

You should mention them:

·       During GST registration

·       On GST invoices

·       While filing GST returns

·       To determine correct GST rates

What happens if I don’t use the correct HSN/SAC code?

Using the wrong code or skipping it can lead to:

·       Incorrect tax charged

·       Mismatch in returns

·       Problems in input tax credit claims

·       Penalties in audits

Are HSN codes the same across all countries?

Yes, the base 6-digit HSN codes are standard globally (for over 200 countries). But some countries, including India, extend them to 8 digits for finer classification.

HSN or SAC – which one should I use?

·       Selling goods? Use HSN code.

·       Providing services? Use SAC code.

How can I avoid mistakes while using HSN/SAC codes?

·       Keep a ready reference list of your product/service codes

·       Use automated software or invoicing tools for GST billing

·       Cross-check the applicable GST rates

·       Save invoice templates to avoid repetition

Is a GST bill valid without an HSN code?

No, they are invalid. The reason is HSN is a mandatory requirement for claiming input tax credits and ensuring compliance.

Are HSN codes the same across all countries?

Yes, they are identical in all the countries that are under the World Customs Organisation (WCO), which is over 200 countries and economies. They use 6-digit HSN codes to classify goods. However, some countries use 8-digit codes to further sub-classify products or goods.