GST HSN and SAC Codes Explained: A Simple Guide

What Are HSN and SAC Codes?

If you are a business owner filing GST returns, you have probably come across the terms HSN and SAC codes. These codes are essential for classifying goods and services under GST, and using the correct codes on your invoices is mandatory. Getting them wrong can lead to penalties, rejected Input Tax Credit claims, and compliance headaches that no small business owner needs.

This comprehensive guide explains everything you need to know about HSN and SAC codes — what they are, why they matter, how to find the right codes for your products and services, industry-specific examples, and a step-by-step lookup process that makes code identification simple.

HSN Codes (Harmonized System of Nomenclature)

HSN codes are used to classify goods. This is an internationally recognized system developed by the World Customs Organization (WCO) and is used by over 200 countries for customs and trade purposes. India adopted the HSN system for GST classification, making it easier to standardize the taxation of goods across the country.

The HSN system is hierarchical, organized in a logical structure from broad categories to specific product types. Each level adds more specificity:

2-digit codes: Represent the chapter (e.g., 10 = Cereals, 61 = Knitted clothing)
4-digit codes: Represent the heading within a chapter (e.g., 1006 = Rice, 6109 = T-shirts)
6-digit codes: Represent the sub-heading for more specific classification (e.g., 100630 = Semi-milled rice)
8-digit codes: India-specific extensions for even more granular classification

For example: Rice has the HSN code 1006, cotton T-shirts fall under 6109, and mobile phones are classified under 8517.

SAC Codes (Services Accounting Code)

SAC codes are used to classify services under GST. These are specific to India's GST framework and follow a 6-digit structure. Each type of service has a unique code that determines the applicable tax rate.

SAC codes always start with "99" which distinguishes them from HSN codes for goods. The remaining digits narrow down the specific type of service:

First 2 digits (99): Identifies the code as a service code
Digits 3-4: Major service category (e.g., 9983 = Other professional services, 9963 = Accommodation services)
Digits 5-6: Specific service type within the category

For example: IT software services use SAC code 998314, accounting services use 998221, and restaurant services fall under 996331.

Why Are These Codes Important?

HSN and SAC codes are far more than just administrative requirements. They play a critical role in multiple aspects of your GST compliance and business operations:

Correct Tax Rate: The HSN/SAC code determines which GST rate applies to your product or service. The same product classified under different HSN codes could attract different tax rates, making accuracy essential.
Invoice Compliance: Including the correct codes on invoices is mandatory under GST law. Invoices without proper HSN/SAC codes may be considered non-compliant, which can cause problems during audits.
GST Return Filing: GSTR-1 requires HSN-wise summary of all outward supplies. If your codes are inconsistent or incorrect throughout the year, compiling accurate returns becomes a nightmare.
Input Tax Credit: Incorrect codes can lead to ITC mismatches and rejection of credit claims. Your buyer relies on the HSN/SAC code on your invoice to claim their ITC correctly.
E-Invoicing Compliance: For businesses that fall under the e-invoicing mandate, correct HSN/SAC codes are validated by the Invoice Registration Portal (IRP). Invoices with invalid codes will be rejected.
Export and Import: HSN codes are used internationally for customs classification. Businesses involved in import-export need accurate HSN codes for customs clearance and duty calculation.
Government Analytics: The government uses HSN/SAC data from GST returns to track economic activity, identify tax evasion patterns, and make policy decisions. Incorrect codes distort this analysis.

How Many Digits Do You Need?

The number of HSN digits required on your invoices depends on your business turnover:

Turnover up to ₹5 crore: 4-digit HSN code is mandatory on all B2B invoices
Turnover above ₹5 crore: 6-digit HSN code is mandatory on all invoices

For SAC codes, 6-digit codes are generally used regardless of turnover.

It is important to note that even if your turnover requires only 4-digit codes, using 6-digit or 8-digit codes is always acceptable and recommended for greater accuracy. More specific codes reduce the chance of misclassification and make your GST return filing smoother.

Industry-Specific HSN Code Examples

Here are commonly used HSN codes organized by industry to help you identify the right codes for your products:

Food and Grocery

0201-0210: Meat and edible meat products
0401-0406: Dairy products (milk, cheese, butter, ghee)
0713: Dried pulses (dal, chana, rajma) — GST 5%
0910: Spices (ginger, turmeric, cumin) — GST 5%
1006: Rice — GST 5% (branded and packaged)
1101: Wheat flour (atta) — GST 5% (branded and packaged)
1704: Sugar confectionery — GST 18%
1905: Bakery products (bread, biscuits, cakes)
2201: Mineral water and packaged drinking water — GST 18%

Textiles and Garments

5208-5212: Cotton fabrics — GST 5%
6101-6114: Knitted garments (T-shirts, sweaters, trousers)
6201-6211: Woven garments (shirts, suits, dresses)
6109: T-shirts and vests — GST 5% (below Rs 1000) or 12% (above Rs 1000)
6403: Leather footwear — GST 18%
6404: Sports footwear — GST 5% (below Rs 1000) or 18% (above Rs 1000)

Electronics and IT

8471: Computers and laptops — GST 18%
8517: Mobile phones — GST 18%
8518: Speakers and headphones — GST 18%
8528: Televisions and monitors — GST 18% or 28%
8443: Printers — GST 18%

Hardware and Building Materials

2523: Cement — GST 28%
7213-7228: Iron and steel products — GST 18%
6907: Ceramic tiles — GST 18%
7005: Glass — GST 18%
8481: Taps and valves — GST 18%

Common SAC Codes by Service Industry

Here are frequently used SAC codes organized by service type:

IT and Software Services

998311: IT consulting and support services — GST 18%
998312: IT design and development services — GST 18%
998313: IT infrastructure management — GST 18%
998314: IT software services — GST 18%
998315: Hosting and IT infrastructure provisioning — GST 18%

Professional and Business Services

998221: Accounting, auditing, and bookkeeping services — GST 18%
998211: Legal advisory and representation services — GST 18%
998231: Management consulting services — GST 18%
998241: Architectural services — GST 18%
998251: Engineering services — GST 18%

Education and Training

999210: Primary education services — Exempt
999220: Secondary education services — Exempt
999230: Higher education services — Exempt (recognized institutions)
999293: Commercial training and coaching — GST 18%

Transport and Logistics

996511: Road transport of goods — GST 5% (with limited ITC) or 12%
996521: Passenger transport by road — GST 5% (AC) or Exempt (non-AC)
996601: Courier services — GST 18%
996711: Cargo handling services — GST 18%

Food and Hospitality

996331: Restaurant services (non-AC, without liquor) — GST 5%
996332: Restaurant services (AC, with liquor) — GST 5%
996311: Hotel accommodation (room tariff up to Rs 7500) — GST 12%
996312: Hotel accommodation (room tariff above Rs 7500) — GST 18%

Step-by-Step Guide: How to Find the Right HSN/SAC Code

Finding the correct HSN or SAC code can seem daunting, but following this systematic approach makes it straightforward:

Method 1: GST Portal Search

Visit the GST portal at services.gst.gov.in
Navigate to Services then User Services then Search HSN/SAC Code
Select whether you are searching for a goods code (HSN) or service code (SAC)
Enter a keyword describing your product or service (e.g., "rice" or "IT consulting")
Browse the results and identify the code that most accurately describes your specific product or service
Note down the applicable GST rate for that code
Verify the code by cross-referencing with the GST rate schedule notifications

Method 2: Use Billing Software with Built-in HSN/SAC Database

Modern GST billing software like BillBooks comes with a comprehensive built-in HSN/SAC code database. This is the easiest and most efficient method for most business owners:

While adding a product or service to your catalog in BillBooks, search for the item name
The software will suggest matching HSN/SAC codes along with the applicable tax rate
Select the most appropriate code and it will be saved to your product profile
From that point on, every invoice that includes this product will automatically include the correct HSN/SAC code

This method saves enormous time and eliminates the risk of manual lookup errors. Explore how BillBooks simplifies HSN/SAC code management by visiting our features page.

Method 3: CBIC Website and Tariff Schedules

The Central Board of Indirect Taxes and Customs (CBIC) publishes detailed tariff schedules that list every HSN code with the applicable GST rate. These are the authoritative source for code classification. While comprehensive, they can be difficult to navigate for someone not familiar with the classification system.

Method 4: Consult Your Chartered Accountant

If you are unsure about the classification of your goods or services, consult your Chartered Accountant. This is especially important for products that could fall under multiple categories or for new products that may not have a clear classification. Using the wrong code can lead to tax demand notices and penalties, so professional guidance is worth the investment.

Understanding HSN Code Structure with an Example

Let us trace through how HSN codes work using a practical example — a cotton T-shirt:

Section XI: Textiles and textile articles (broad category)
Chapter 61: Articles of apparel and clothing accessories, knitted or crocheted
Heading 6109: T-shirts, singlets, and other vests, knitted or crocheted
Sub-heading 610910: Of cotton

So a cotton T-shirt has the HSN code 610910. If your turnover is below Rs 5 crore, you can use the 4-digit code 6109 on your invoices. If above Rs 5 crore, you need the 6-digit code 610910.

Understanding this hierarchical structure makes it much easier to identify codes for new products. Start with the broad category, narrow down through chapters and headings, and you will find the specific code for your product.

Common Mistakes to Avoid

Incorrect HSN/SAC code usage is one of the most common compliance issues flagged during GST audits. Here are the mistakes you must avoid:

Using generic or incorrect HSN/SAC codes to avoid higher tax rates: The tax department uses data analytics to identify businesses using lower-rate codes for products that should be classified under higher-rate codes. This is treated as tax evasion and can result in penalties, interest, and prosecution.
Not updating codes when GST council revises classifications: The GST Council periodically revises HSN/SAC classifications and tax rates. If you do not update your product catalog accordingly, your invoices become non-compliant. Read our blog for updates on GST changes.
Leaving the HSN/SAC field blank on invoices: Some business owners skip the HSN/SAC field on invoices out of laziness or ignorance. This makes the invoice non-compliant and can result in penalties during assessment.
Using goods codes (HSN) for services or vice versa: HSN codes are for goods and SAC codes are for services. Mixing them up is a common error, especially for businesses that sell both goods and services.
Using the same code for all products: Some businesses assign a single generic HSN code to their entire product catalog. This is incorrect if your products span different categories with different tax rates.
Not using enough digits: Using a 2-digit code when 4 or 6 digits are required by your turnover threshold is non-compliant and can attract scrutiny during audits.
Inconsistent code usage: Using different HSN codes for the same product on different invoices creates reconciliation issues during return filing and audits.
Ignoring code changes for composite supplies: When you sell a product as part of a composite supply (e.g., a product with installation service), the classification may be different from the standalone product. Consult your CA for proper classification of composite and mixed supplies.

HSN/SAC Codes and E-Invoicing

With the progressive reduction of the e-invoicing threshold by the government, more and more businesses are being brought under the e-invoicing mandate. HSN/SAC codes play a critical role in e-invoicing because the Invoice Registration Portal (IRP) validates these codes. If you submit an invoice with an invalid or incorrect HSN/SAC code, the IRP will reject it, and you will not receive an Invoice Reference Number (IRN).

This makes it even more critical to maintain accurate HSN/SAC codes in your product catalog. Using invoice software like BillBooks that comes with a validated HSN/SAC database ensures that your codes are always correct and e-invoicing compatible.

How BillBooks Simplifies HSN and SAC Code Management

BillBooks makes HSN and SAC code management simple and error-free. Here is how:

Built-in HSN/SAC database: Search and select from a comprehensive database of codes right within the app — no need for external lookups
One-time setup: Add the correct codes to your product catalog once, and they automatically appear on every invoice that includes those products
Automatic tax rate linking: When you select an HSN/SAC code, the corresponding GST rate is automatically applied, eliminating manual rate entry errors
HSN summary for GSTR-1: BillBooks automatically generates the HSN-wise summary required for GSTR-1 filing, saving hours of manual compilation
Regular updates: The HSN/SAC database is updated whenever the GST Council revises classifications or rates
Validation checks: The software validates codes during invoice creation to prevent incorrect or invalid codes from being used

No more guessing or manual lookups — focus on your business while BillBooks handles the compliance. Learn about all our GST compliance features on our features page, or read our complete GST compliance guide for more details on staying compliant as a small business in India.