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What are HSN Codes?

HSN stands for Harmonized System of Nomenclature. It is a globally recognized system of coding developed by the World Customs Organization (WCO) for the classification of goods. The HSN system simplifies the identification and taxation of products by assigning a unique code to each item.

For instance:

  • HSN code for sugar is 1701.
  • HSN code for soap is 3401.

Each product is categorized systematically under a unique HSN code, ensuring uniformity in trade and taxation globally.

What are SAC Codes?

SAC stands for Services Accounting Code. It is used to classify and identify different types of services under the GST system in India. SAC codes are issued by the Central Board of Indirect Taxes and Customs (CBIC). .

For instance:

  • SAC code for legal services is 998212.
  • SAC code for advertising services is 998361.

These codes help businesses and service providers determine the GST rates applicable to their services.

Which businesses are exempt from using HSN codes for selling goods?

As per GST regulations, businesses with an annual turnover of up to 1.5 crores are not required to use HSN codes while selling goods. These small businesses benefit from simplified invoicing.

Where Should the HSN/SAC Code Be Mentioned?

HSN or SAC codes must be mentioned in the following documents:

  • GST Invoices
  • GST Returns (GSTR-1, GSTR-3B, etc.)
  • E-Way Bills
  • Customs Documentation for imports/exports

Proper mention of HSN/SAC codes ensures compliance and avoids penalties.

How Many Codes Are Businesses Required to Mention on the Invoice?

The number of HSN codes required to be mentioned on invoices depends on the business turnover:

  • Up to ₹1.5 Crore: No HSN code required.
  • ₹1.5 Crore to ₹5 Crore: 2-digit HSN code.
  • Above ₹5 Crore: 4-digit HSN code.
  • International Trade: 8-digit HSN code.

For services, SAC codes are typically 6 digits.

What Type of Businesses Are Not Required to Use HSN Code While Selling Their Goods?

As per GST regulations, businesses with an annual turnover of up to1.5 crores are not required to use HSN codes while selling goods. These small businesses benefit from simplified invoicing.

How Are Products Classified Under HSN Code?

Products under the HSN system are classified based on the following hierarchy:

  • Sections: Broad categories (e.g., chemicals, machinery, food, etc).
  • Chapters: 2-digit codes that group products by type.
  • Headings: 4-digit codes for specific product types.
  • Sub-headings: 6-8 digit codes for detailed classifications.

Why Is HSN Important?

HSN codes play a crucial role in:

  • Standardization: Uniform classification of goods worldwide.
  • Taxation: Accurate calculation of GST, customs, and other taxes.
  • Trade Compliance: Simplifying import/export procedures.
  • Avoiding Discrepancies: Reducing errors in tax filings.

What is HSN Code?

An HSN code is a 6 to 8-digit numeric code used for identifying goods internationally and domestically. It ensures accurate taxation and simplifies trade practices.

Understanding the HSN Code

HSN codes are structured as follows:

  • First 2 Digits: Chapter (Broad classification).
  • Next 2 Digits: Heading (Product type).
  • Next 2 Digits: Sub-heading (Detailed classification).
  • Optional Digits: Additional codes for precise identification.

HSN Worldwide

The HSN system is adopted globally in over 200 countries, covering over 98% of international trade. It facilitates seamless international commerce and tax reporting..

Structure of HSN Code in India

  • 2 Digits: Chapter level (e.g., 34 - Soap and detergents).
  • 4 Digits: Heading level (e.g., 3401 - Soaps).
  • 6 Digits: Sub-heading level (e.g., 3401 10 - Toilet soaps).
  • 8 Digits: Specific classification (e.g., 3401 10 10 - Medicated soap).

HSN in India

In India, HSN codes are used under the GST regime to classify goods and levy appropriate taxes. Indian businesses use 2, 4, or 8-digit HSN codes based on their turnover and trade requirements.

Declaration of HSN Code for Goods and Services

Businesses must ensure:

  • Proper declaration of HSN codes in invoices.
  • Correct reporting of HSN in GST returns (GSTR-1, GSTR-3B).
  • Adherence to turnover-based requirements for HSN reporting.

How Does HSN Code Work?

HSN codes work by categorizing goods into a logical structure. For example:

  • Chapter: 34 (Soap, cleaning agents, candles, etc.)
  • Heading: 01 (Soap and organic surface-active products)
  • Sub-heading: 10 (Toilet soap)
  • HSN Code: 3401 10 10

Businesses identify and use these codes for invoices, GST returns, and other tax documentation.

Services Accounting Code (SAC) in GST

SAC codes are the HSN equivalent for services. Each service type has a unique 6-digit SAC code to identify the nature of the service and applicable GST rate.

Why Is HSN Important Under GST?

HSN simplifies GST compliance by:

  • Standardizing Tax Slabs
  • Reducing Confusion
  • Ensuring Proper Input Tax Credit (ITC)
  • Facilitating Audit and Compliance

HSN-Wise Summary of Outward Supplies

Businesses need to provide an HSN-wise summary of outward supplies in GST returns (GSTR-1). This summary includes:

  • HSN Code
  • Taxable Value
  • Applicable GST (CGST, SGST, IGST)
  • Quantity and Unit

HSN in GST

Under GST, HSN codes are critical for calculating taxes on goods, whereas SAC codes are used for services. These codes streamline GST compliance, returns filing, and audits.

How Can I Find My Product in HSN List and Its Relevant HSN Code?

To find the HSN code for your product:

  • Refer to the GST Portal or HSN Handbook.
  • Search by product name or category in the HSN database.
  • Use HSN lookup tools available online.
  • Consult tax professionals for complex classifications.

Process to Identify the Correct HSN or SAC Code for My Business

To identify the correct HSN or SAC code for your business, follow these steps:

  • Determine the Nature of Your Product/Service: Clearly define whether you are dealing in goods or services.
  • Classify Under Broad Categories: For goods, identify the relevant section and chapter. For services, identify the broad category under SAC.
  • Refer to GST Resources: Use the GST Portal, HSN Handbook, or SAC Code List for reference.
  • Look Up Descriptions: Match your product or service description with the official HSN/SAC code description.
  • Use Online Tools: Use HSN or SAC code lookup tools to simplify the search process.
  • Seek Expert Help: For complex or unique products/services, consult a GST professional or tax advisor.
  • Validate with GST Returns: Verify the selected code while filing GST invoices and returns.

HSN Chapters and Corresponding GST Tax Rates

  • HSN Chapter 1-5

    Animal and Animal Products (Livestock, Meat, Dairy, etc.)

    GST Rate: 5%, 12%, or 18%, depending on the product.

  • HSN Chapter 6-14

    Vegetable Products, Fruits, and Nuts

    GST Rate: 5%, 12%, or 18%.

  • HSN Chapter 15

    Animal or Vegetable Fats and Oils

    GST Rate: 5%, 12%, or 18%.

  • HSN Chapter 16

    Prepared Foods

    GST Rate: 12% or 18%.

  • HSN Chapter 17

    Sugars and Sugar Confectionery

    GST Rate: 5%, 12%, or 18%.

  • HSN Chapter 18

    Cocoa and Cocoa Preparations

    GST Rate: 18%.

  • HSN Chapter 19

    Preparations of Cereal, Flour, and Milk

    GST Rate: 5%, 12%, or 18%.

  • HSN Chapter 20

    Preparations of Vegetables, Fruits, and Nuts

    GST Rate: 5%, 12%, or 18%.

  • HSN Chapter 21

    Miscellaneous Edible Preparations

    GST Rate: 12%, 18%.

  • HSN Chapter 22

    Beverages, Spirits, and Vinegar

    GST Rate: 12%, 18%, or 28%.

  • HSN Chapter 23

    Residues and Waste from Food Industries

    GST Rate: 5%, 18%.

  • HSN Chapter 24

    Tobacco and Manufactured Tobacco Substitutes

    GST Rate: 28%.

  • HSN Chapter 25

    Salt, Sulfur, Earths, and Stone

    GST Rate: 5%.

  • HSN Chapter 26

    Ores, Slag, and Ash

    GST Rate: 5%, 18%.

  • HSN Chapter 27

    Mineral Fuels, Oils, and Wax

    GST Rate: 5%, 18%, or 28%.

  • HSN Chapter 28

    Inorganic Chemicals

    GST Rate: 18%.

  • HSN Chapter 29

    Organic Chemicals

    GST Rate: 18%.

  • HSN Chapter 30

    Pharmaceutical Products

    GST Rate: 5%, 12%, or 18%.

  • HSN Chapter 31

    Fertilizers

    GST Rate: 5%.

  • HSN Chapter 32

    Tanning or Dyeing Extracts

    GST Rate: 18%.

  • HSN Chapter 33

    Essential Oils, Perfumes, and Cosmetics

    GST Rate: 18%.

  • HSN Chapter 34

    Soaps, Organic Surface Active Agents

    GST Rate: 18%.

  • HSN Chapter 35

    Polymers of Ethylene, Styrene, etc.

    GST Rate: 18%.

  • HSN Chapter 36

    Explosives, Fireworks

    GST Rate: 18%.

  • HSN Chapter 37

    Photographic or Cinematographic Goods

    GST Rate: 18%.

  • HSN Chapter 38

    Miscellaneous Chemical Products

    GST Rate: 12%, 18%.

  • HSN Chapter 39

    Plastics and Articles Thereof

    GST Rate: 18%.

  • HSN Chapter 40

    Rubber and Articles Thereof

    GST Rate: 18%.

  • HSN Chapter 41-43

    Leather and Articles Thereof

    GST Rate: 12%, 18%.

  • HSN Chapter 44-46

    Wood and Articles of Wood

    GST Rate: 12%, 18%.

  • HSN Chapter 47

    Pulp of Wood, Paper, and Paperboard

    GST Rate: 12%, 18%.

  • HSN Chapter 48

    Paper and Paperboard; Articles

    GST Rate: 12%, 18%.

  • HSN Chapter 49

    Printed Books and Newspapers

    GST Rate: 5%.

  • HSN Chapter 50-63

    Textiles and Textile Articles

    GST Rate: 5%, 12%, 18%.

  • HSN Chapter 64-67

    Footwear, Headgear, Umbrellas

    GST Rate: 5%, 18%.

  • HSN Chapter 68-71

    Stone, Plaster, Cement, and Articles

    GST Rate: 18%.

  • HSN Chapter 72-83

    Base Metals and Articles Thereof

    GST Rate: 12%, 18%.

  • HSN Chapter 84-85

    Machinery and Mechanical Appliances

    GST Rate: 18%, 28%.

  • HSN Chapter 86-89

    Vehicles and Transport Equipment

    GST Rate: 12%, 28%.

  • HSN Chapter 90

    Optical, Photographic, Medical Instruments

    GST Rate: 12%, 18%.

  • HSN Chapter 91

    Clocks and Watches

    GST Rate: 18%.

  • HSN Chapter 92

    Musical Instruments

    GST Rate: 18%.

  • HSN Chapter 93

    Arms and Ammunition

    GST Rate: 18%.

  • HSN Chapter 94

    Furniture, Bedding, and Mattresses

    GST Rate: 18%.

  • HSN Chapter 95

    Toys, Games, and Sports Equipment

    GST Rate: 18%.

  • HSN Chapter 96

    Miscellaneous Manufactured Articles

    GST Rate: 18%.

  • HSN Chapter 97

    Works of Art

    GST Rate: 12%.

SCN (Service Code Number) Chapters and Corresponding GST Tax Rates

  • SCN Chapter 99

    Miscellaneous Services

    GST Rate: 18%.

  • SCN Chapter 99

    (Various Services under GST)

    GST Rate: 5%, 12%, 18%, 28% depending on the service type (transport, education, hotel, etc.)

Some services are exempt or taxed at 0% (e.g., health and education services), while others may have a higher tax rate, such as luxury services or services related to alcohol, which are taxed at 28%.

  • Please note that the exact tax rate for each HSN/SCN code may vary depending on specific goods or services within each chapter, and the list above is a general overview. For a precise rate, it's essential to refer to the GST Rate Schedule or consult our tax professional now!
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