Understanding HSN and SAC Code Basics
What Are HSN and SAC Codes?
HSN (Harmonized System of Nomenclature) codes classify goods, while SAC (Services Accounting Codes) classify services for GST purposes. Every product you sell and service you provide must have the correct code on GST invoices.
HSN codes are 4, 6, or 8 digits depending on your turnover. Businesses with turnover above ₹5 crores need 6-digit codes, while smaller businesses can use 4-digit codes. SAC codes are always 6 digits for all service providers.
Why Accurate Classification Matters
Wrong HSN or SAC codes can trigger GST notices and penalty demands. Each code determines the applicable GST rate — misclassification means wrong tax collection and potential legal issues during audits.
How to Find the Right HSN/SAC Code
Using the Official GST Portal
Visit gst.gov.in and navigate to 'Services' → 'Search HSN/SAC Code'. Enter your product or service description in simple terms. The system shows matching codes with descriptions and current GST rates.
This official search covers the complete code database and stays updated with rate changes and new classifications.
Step-by-Step Lookup Process
- Write down exactly what you're selling in simple words — "cotton fabric" works better than "textile merchandise"
- Check multiple similar codes if your search returns several options
- Read code descriptions carefully — small differences can mean different GST rates
- Cross-check with codes your suppliers use on their invoices to you
Understanding Code Structure
HSN codes follow a logical chapter system. Chapter 25 covers salt and stone products, while Chapter 84 covers machinery. SAC codes begin with 99 — legal services start with 998211, transport services begin with 996.
Common Classification Rules
Mixed Products and Primary Use
For products with multiple materials, use the HSN code for the primary component. A plastic toy with metal parts gets the plastic HSN code if plastic comprises more than 50% of the value.
Avoiding Common Mistakes
- Don't default to generic "others" codes when specific options exist
- Use minimum digits required for your turnover bracket
- Retailers use the same HSN codes as suppliers; manufacturers need more specific codes
- Keep records of how you determined each code for audit purposes
Always verify current rates and code updates on gst.gov.in, as classification rules change periodically.