Sanket VananiIf you run a small or medium business in India, you’ve probably heard of HSN and SAC codes.
They aren’t just tax jargon — they’re mandatory fields on your GST invoice. Getting them wrong could mean notices, penalties, or disrupted input tax credits for your customers.
Here’s a clear, SME-friendly guide.
1. What is HSN and SAC?
-
HSN (Harmonized System of Nomenclature):
Used for goods. This is a global classification system for products, adopted by GST to ensure uniformity in trade.
Example:- Rice:
1006 - Office chairs:
9401
- Rice:
-
SAC (Services Accounting Code):
Used for services. It’s a similar classification system but designed for service categories.
Example:- IT consulting:
998313 - Courier services:
996812
- IT consulting:
2. Why do SMEs need to care?
- Legal requirement:
Under GST rules, businesses must mention the correct HSN or SAC for every line item. - Smooth ITC claims:
Your customers can only claim input tax credit (ITC) if your invoice is accurate. - Avoid penalties:
Wrong codes can lead to fines or rejection of GST returns.
3. How many digits do you need?
The number of HSN digits depends on your turnover:
| Annual Turnover | HSN Digits Required |
|---|---|
| Up to ₹5 crore | 4 digits |
| Above ₹5 crore | 6 digits |
For SAC, the code length is fixed — always 6 digits.
4. Where to find HSN/SAC codes?
- Government GST portal:
Use the official search tool: https://services.gst.gov.in/services/searchhsnsac - Trade associations:
Many industry groups publish HSN/SAC lists for their products/services. - Software automation:
Good billing software lets you save items/services with pre-set codes.
5. Common mistakes to avoid
- Copy-paste errors: Entering wrong codes from unrelated industries.
- Using old codes: GST periodically updates HSN/SAC.
- One code for everything: Every product/service type must have its correct code.
6. Example of a compliant GST invoice line
| Item Name | HSN/SAC | Qty | Rate | Taxable Value | CGST 9% | SGST 9% |
|---|---|---|---|---|---|---|
| Office Chair | 9401 | 10 | ₹2,000 | ₹20,000 | ₹1,800 | ₹1,800 |
7. Pro Tips for SMEs
- Save all frequently sold products/services with their HSN/SAC in your billing software.
- Review your codes every 6 months to match GST updates.
- Train your team — even one wrong code can cause compliance headaches.
Bottom line:
Treat HSN and SAC codes as the foundation of GST compliance. Once they’re set correctly in your system, GST invoicing becomes a smooth, almost automatic process.