HSN and SAC Codes: A Practical Guide for Businesses and CA Firms

Every GST invoice needs a classification code, and getting it wrong causes problems later. A wrong code can lead to the wrong tax rate, a mismatch between invoices and returns, and awkward conversations with your clients' customers.

This guide explains what HSN and SAC codes are, how many digits you must show, how to find the right code, and how CA firms can keep it under control across many clients.

What are HSN and SAC codes?

HSN (Harmonised System of Nomenclature) classifies goods. HSN codes are common to GST and Customs: the codes in the Customs Tariff are used for GST as well. In the Customs Tariff, the code is built up in levels:

• 4 digits: heading
• 6 digits: sub-heading
• 8 digits: tariff item

SAC (Services Accounting Code) classifies services. SAC codes start with 99. For example, heading 9982 covers legal and accounting services, and codes under it include 998221 (financial auditing), 998222 (accounting and bookkeeping) and 998231 (corporate tax consulting).

The GST rate for a supply is decided by its classification, so the right code matters.

How many digits must you show on an invoice?

The rule comes from Notification No. 78/2020-Central Tax (dated 15 October 2020), effective 1 April 2021. It depends on your aggregate turnover in the previous financial year:

A taxpayer with turnover up to ₹5 crore may skip the HSN digits on invoices for supplies to unregistered persons (B2C).

Because the rule looks at the previous year's turnover, review each client's turnover at the start of every financial year. A client who crossed ₹5 crore last year needs to move to 6 digits.

How to find the right HSN or SAC code

Step 1: Describe the product or service precisely. Note what it is made of, what it is used for and how it is sold. Vague descriptions lead to wrong codes.

Step 2: Search the official GST portal. The portal has a free HSN/SAC search that works even before login: Services > User Services > Search HSN Code. Enter at least the first three digits of a code, or search by description. You can also download the HSN directory in Excel from the same page.

Step 3: Understand what the search result means. According to the portal's own guide, the search tool matches your query with the HSN and descriptions that other taxpayers used when generating e-invoices. It therefore shows prevailing practice. It is not a legal ruling on classification, so for doubtful items check the Customs Tariff and get professional advice.

Step 4: Confirm the rate from the current CBIC rate schedule. Rates change through notifications. Check the latest position on the CBIC tax information site before you invoice.

Step 5: Save the code once per product. Keep the same code for the same product on every invoice.

Common mistakes to avoid

1. Using the wrong number of digits. Watch the ₹5 crore threshold, which is based on last year's turnover.
2. Copying a supplier's code without checking. Their code may be wrong or may describe a slightly different product.
3. Using different codes for the same product on different invoices. This creates confusion in reconciliation.
4. Relying on old rate lists. Rates change by notification, so always check the current schedule.
5. Skipping a periodic review. Product ranges change, and so does the classification that fits.

A simple HSN/SAC checklist for CA firms

• Keep a client-wise master list of products or services, their codes and the rates applied.
• At the start of each financial year, check each client's turnover against the ₹5 crore threshold and update the digit requirement.
• Add an HSN/SAC check to your monthly pre-filing routine, alongside ledger review and reconciliation.
• Review the list whenever a rate notification is issued, and note the effective date.
• Record who approved each code decision, so you have an audit trail if questions arise later.

Frequently asked questions

Is an HSN code mandatory on every invoice?
For B2B invoices, yes: 4 digits up to ₹5 crore turnover and 6 digits above. A taxpayer up to ₹5 crore may skip the digits on invoices to unregistered persons.

Where can I search for HSN codes officially?
On the GST portal under Services > User Services > Search HSN Code. No login is needed.

Are HSN codes for GST different from Customs codes?
No. Codes in the Customs Tariff are used for GST as well.

How do I know the correct GST rate for a code?
Check the current rate schedule on the CBIC tax information site, and confirm against the latest notification.

What if the code I need is not on the GST portal search?
The portal advises raising a ticket on the GST Self-Service Portal when a valid HSN is not available in the search.

Official sources

• GST Portal HSN/SAC Search: https://services.gst.gov.in/services/searchhsnsac
• GST Portal user manual, Search HSN Code: https://tutorial.gst.gov.in/userguide/taxpayersdashboard/Search_HSN_SAC_Tax_Rates_manual.htm
• PIB release on HSN/SAC requirements from 1 April 2021: https://www.pib.gov.in/PressReleasePage.aspx?PRID=1708713&reg=48&lang=2
• CBIC tax information (current rates): https://taxinformation.cbic.gov.in/

Disclaimer: This article is for general information only and is not professional advice. Rules and rates change, so verify against current notifications before filing or invoicing.