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What is an HSN code?

An HSN code (Harmonised System of Nomenclature) is a numerical code used to classify goods under India's GST system. It identifies what a product is and determines the GST rate that applies to it.

HSN was developed by the World Customs Organisation (WCO) and is used in over 200 countries. India uses 8-digit HSN codes, the most granular level, for exports and imports, while 4-digit and 6-digit codes are used for domestic GST invoicing depending on turnover.

What is a SAC code?

A SAC code (Services Accounting Code) is the equivalent of HSN for services. While HSN classifies goods, SAC classifies every service category under GST — from IT services and consulting to construction and healthcare.

All SAC codes are 6 digits and begin with 99. The first two digits (99) identify it as a service code; the next two digits indicate the broad service category; the last two digits specify the exact service type.

What does an HSN code look like?

India uses an 8-digit HSN code structure. Each pair of digits narrows the classification:

For domestic GST invoicing, the number of digits required depends on your annual aggregate turnover (AATO):

When is an HSN or SAC code mandatory?

HSN codes are mandatory on invoices and in GSTR-1 under the CGST Rules for any registered taxpayer supplying taxable goods. SAC codes are mandatory for service providers on all invoices.

Two situations where the requirement does not apply:

• Turnover below ₹1.5 crore: HSN codes are not required on invoices (though they are still required in GSTR-1 returns for turnover between ₹1.5 crore and ₹5 crore)

• Composition scheme taxpayers: Not required to mention HSN codes on their bills of supply

Using an incorrect HSN code on a tax invoice can lead to penalties under Section 122 of the CGST Act and block the buyer's ability to claim input tax credit.

What GST rates apply to goods and services?

GST rates in India are set by the GST Council and are linked directly to the HSN or SAC code. The five standard slabs are:

• 0%: Essential food items, fresh produce, educational services

• 5%: Edible oils, sugar, domestic LPG, some transport services

• 12%: Processed food, business class air travel, some construction services

• 18%: Most manufactured goods, IT services, restaurant services

• 28%: Luxury and sin goods — cars, tobacco, aerated drinks, casinos

The applicable rate for any specific product or service is determined by the exact HSN or SAC code, not by the broad category alone. Two products in the same chapter can attract different rates based on their sub-heading.

What is the difference between HSN and SAC codes?

HSN and SAC codes are two parallel classification systems under India's GST framework:

• HSN codes classify physical goods — anything you can buy, sell, manufacture, import, or export

• SAC codes classify services — anything provided in exchange for a fee where no transfer of goods occurs

Both must be declared on invoices and in GST returns. If your business supplies both goods and services, you need both HSN codes for the goods portion and SAC codes for the services portion of your invoices.