Tax, GST and company law glossary

HSN and SAC Codes

Codes used to classify goods (HSN) and services (SAC) under GST.

In short

Businesses with turnover up to ₹5 crore show 4-digit HSN codes on B2B invoices; larger businesses show 6 digits. SAC codes for services start with 99.

What it means

HSN (Harmonised System of Nomenclature) codes classify goods, and SAC (Services Accounting Code) codes classify services, under GST. Every item you sell falls under a code, and the code decides the GST rate that applies. Using the right code on invoices and returns makes sure you charge the correct tax and your buyers get correct input tax credit.

How it works

HSN is an international system; India uses up to 8 digits. The first 2 digits are the chapter, 4 digits the heading, 6 digits the sub-heading and 8 digits the tariff item. SAC codes for services start with 99.

  • Turnover up to ₹5 crore: at least 4-digit HSN on B2B invoices; optional for B2C invoices.

  • Turnover above ₹5 crore: 6-digit HSN on all invoices.

  • GSTR-1 Table 12: an HSN-wise summary of sales must be reported, split into B2B and B2C, with codes selected from the portal list.

  • Exports and imports usually use the full 8-digit code under customs law.

Example

Mehta Computers, with turnover of ₹3 crore, sells a laptop to a registered business.

HSN chapter 84 covers machinery and computers. Heading 8471 covers computers. Sub-heading 847130 covers portable computers such as laptops.

Since Mehta’s turnover is below ₹5 crore, it shows 8471 on the B2B invoice.

Value: ₹60,000

GST at 18%: ₹10,800

Invoice total: ₹70,800

If Mehta’s turnover had been ₹8 crore, it would show 847130.

For services, a CA firm billing audit fees uses a SAC under heading 9982 (legal and accounting services), with GST at 18%. On fees of ₹1,00,000, GST is ₹18,000.

Key points to remember

  • A wrong code can mean the wrong GST rate, leading to short payment with interest and penalty, or excess tax that is hard to recover.

  • GST rates were rationalised from 22 September 2025, so recheck the rate for each code in your billing software.

  • Mismatches between HSN in invoices, GSTR-1 Table 12 and e-way bills are a common scrutiny trigger.

  • If classification is genuinely unclear, check the GST rate notifications or seek an advance ruling rather than guessing.

GST

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Need help with this?

Finaccle’s chartered accountants handle income tax, GST, ROC compliance and business setup for 2,000+ businesses. Use the WhatsApp or Book a call button to speak to the team, or browse our guides by topic in the Knowledge Centre.