HSN and SAC codes classify what you sell so that the correct GST rate applies. Putting the right code on every item is part of a valid tax invoice and of your GST returns.
HSN vs SAC
- HSN (Harmonised System of Nomenclature) classifies goods. The international system has 6 digits; India extends it to 8.
- SAC (Services Accounting Code) classifies services. SAC codes have 6 digits and start with 99.
How many digits must I show?
The number of digits you must show depends on your aggregate turnover in the previous financial year, and the requirement has been tightened over time. Broadly, smaller taxpayers need fewer digits and larger taxpayers need more. The exact thresholds are set by CBIC notifications, so check the latest one on the CBIC website or ask your CA before you finalise your item master.
It is safe to enter the full code if you know it. A longer, correct code is never a problem; a wrong code can be.
How to find the right code
- Check your supplier's invoice for the item: they usually already show the HSN.
- Use the HSN / SAC search on the GST portal (gst.gov.in) or the CBIC tariff schedules.
- If your product could fall under more than one heading, ask your CA; the GST rate follows the code.
Where the code appears
- On every line of the tax invoice.
- In the HSN-wise summary of outward supplies in your GSTR-1.
- On delivery challans and credit notes.
In Rashtra Bill you store the HSN/SAC and GST rate once against each item. Every invoice, challan and quotation then picks them up automatically, and the GSTR-1 HSN summary report groups your sales by code.
Frequently asked questions
Is HSN needed for services?
Services use SAC codes, which work the same way on the invoice. The SAC starts with 99.
Does the GST rate come from the HSN code?
Yes. The rate is notified against the HSN or SAC, which is why the right classification matters. Rates are set by the GST Council and notified by the government, so confirm the current rate for your code.
This guide is general information for small businesses, not legal or tax advice. GST rules, rates and thresholds are changed by notification, so check the current position on the GST portal or with your chartered accountant before acting.