HSN Code and SAC Code — What They Are and How to Find Yours

HSN (Harmonised System of Nomenclature) codes for goods and SAC (Services Accounting Code) codes for services are mandatory elements of GST invoices and returns. Getting your HSN or SAC code wrong can cause issues with ITC for your customers and trigger scrutiny. This guide explains what they are and how to find the right code for your business.

What is HSN Code?

HSN is an internationally recognised system for classifying goods, maintained by the World Customs Organisation (WCO). India uses a 6-digit (internationally standard) to 8-digit (India-specific) HSN code system. Under GST, HSN codes help the government track which goods are being traded and at what tax rate.

What is SAC Code?

SAC codes are the Indian equivalent of HSN codes but for services. They are developed by the Central Board of Indirect Taxes and Customs (CBIC). SAC codes are 6-digit codes. For example: Software Development Services = SAC 998314, Accounting Services = SAC 998222, Legal Services = SAC 998211.

HSN Code Requirements Under GST

• Turnover up to ₹5 crore: 4-digit HSN code mandatory in invoices and GSTR-1 (from April 2021)
• Turnover above ₹5 crore: 6-digit HSN code mandatory
• Exports: 8-digit HSN code mandatory

How to Find Your HSN Code

The CBIC GST Rate Finder at cbic.gov.in is the official tool for finding HSN codes and their applicable GST rates. You can search by product description or chapter. The GST portal also has an HSN search tool under "Search HSN or SAC."

For common goods traded in Kerala: Rice (HSN 1006) — Nil GST; Spices (HSN 09) — 5% GST; Readymade Garments above ₹1,000 (HSN 62) — 12% GST; Mobile phones (HSN 8517) — 18% GST.

Common SAC Codes for Service Businesses

• 998211 — Legal advisory and representation services (18% GST)
• 998222 — Accounting, bookkeeping and auditing services (18% GST)
• 998314 — IT design and development services (18% GST)
• 999511 — Primary education services (Exempt)
• 996111 — Construction of residential buildings (1% or 5% GST)
• 998531 — Advertising services (18% GST)

Consequences of Using Wrong HSN/SAC

Using an incorrect HSN code can result in a mismatch in your customer's GSTR-2A/2B, potential ITC denial for your customer, and notices from the GST department during scrutiny. In extreme cases, the wrong HSN code can lead to a demand for higher tax if the correct code has a higher rate than what you applied.

Conclusion

Using the correct HSN or SAC code on your invoices is a basic but critical GST compliance requirement. SPOTON helps Kerala businesses identify the right codes for all their products and services during registration and ongoing advisory. Contact us for expert GST support.