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HSN and SAC

HSN and SAC

HSN and SAC

Have you heard about HSN and SAC codes! If not, then please read this blog and get a full knowledge about HSN and SAC under GST.

What is HSN Code?

HSN stands for Harmonized System of Nomenclature. It is an international classification system of commodities, which has been developed by the World Customs Organization (WCO). The WCO is an organization of 181 members, most of whom are developing countries, responsible for managing more than 98 percent of world trade. HSN aims to standardize the classification of merchandises under sections, chapters, headings and sub-headings – which results in a 6-digit code for each commodity. In a world divided by languages, HSN brings in a standard code, which ensures that commodities of similar nature are classified properly.

India has been a member of the WCO since 1971 and has been using HSN codes since 1986 to classify the commodities for customs and central excise. Later, 2 more digits were added for better differentiation at customs and excise, which resulted in the 8-digit code, in use today.

What is SAC Code?

SAC stands for Services Accounting Code – which is a unified code for recognition, measurement and taxation of services. SAC has been in existence from the previous regime itself, and have been defined for each type of service by the government for the proper levy of Service Tax. The same code is expected to continue in the GST era.

For more knowledge of GST, please refer our other blogs: – What is GSTAdvantages and Disadvantages of GST,Type of GST taxesExemption list etc.

HSN & SAC codes in GST

Under GST, all goods and services supplied in India have been classified – Goods are classified under the HSN Code and Services are classified under the SAC Code. Based on the HSN or SAC code, GST rates have been fixed in five slabs, namely 0%, 5%, 12%, 18% and 28%.

In the GST regime each GST invoice will have to mention HSN code for all goods which are sold and SAC code for all services which are provided. If you haven’t read our blog related to what is GST invoice please click here. Businesses will thus, need to be aware of the HSN code list and SAC code list for all GST applicable supplies they are dealing in. Under GST, majority of the dealers will need to adopt two, four, or eight digit HSN codes for their commodities, depending on their turn-over the previous year. The following are the detailed requirements:

  • Businesses with turnover of less than INR 1.5 crores – will not be required to use HSN codes
  • Businesses with turnover between INR 1.5 crores and INR 5 crores – will be required to use 2-digit HSN codes
  • Businesses with turnover equal to INR 5 crores and above – will be required to use 4-digit HSN codes
  •  Imports / Exports -8-digit HSN codes
  • Services -5-digit SAC codes

Example 1
Let us see the classification of LAPTOP COMPUTER
Identify: machine
Material: various (above chap.83)
Function: data processing
Possible: section XV1
Possible: Chapter 84
Heading: 84.71
HS CODE: FOUR DIGIT CODE IS 8471

Example 2
Now let us see the classification of Fork of wood
Identify: article of wood
Material: wood (below chap.83)
Function: tableware
Possible: section IX
Possible: Chapter 44
Heading: 44.19
HS CODE: FOUR DIGIT CODE IS 4419

Hey, For more basics of GST refer our other blogs by clicking here: –

  1. What is GST?
  2. Advantages and Disadvantages of GST?
  3. E-Way bill?
  4. Exemption List under GST?
  5. Types of GST Taxes?

 Points to Note

Small dealers under composition scheme will not be required to mention HSN / SAC codes in their invoices.

HSN / SAC codes will need to be mentioned in invoice and mentioned in the GST tax return details, which will be uploaded on the GSTN portal.

At the time of GST registration / GST migration , the HSN / SAC codes of the supplies a business deals in, will need to be mentioned.

If you want to know about HSN and SAC of your business, Please feel free to mail us on info@itslyf.com, We will reply as soon as possible.

Geetika Goyal (Team Itslyf)

HSN AND SAC

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