HSN and SAC code – All you need to Know


The HSN code and SAC code are standard when it comes to the classification of goods and services. HSN Code is necessary for GST Registration, Immigration and Enrolment as it is required to be compulsory given for all the different products, the business manufactures, sales and retails.

HSN and SAC code - All you need to Know

What is the HSN Code?

HSN means the Harmonized System of Nomenclature. It is developed by World Custome Organization (WCO) to the international classification of goods, The WCO is an organization of 181 members, most of which are developing countries.

Most of them are responsible for managing more than 98 percent of world trade. The aim of HSN is to standardize the classification of merchants underclasses, chapters, headings, and sub-headings – resulting in a 6-digit code for each item.

In a world divided by languages, HSN brings a standard code, which guarantees that objects of similar nature are suitably classified.

India has been a part of the WCO since 1971 and has been using the HSN code since 1986 to arrange goods for customs and central excise.

Later, 2 more digits were added for better discrimination in customs and excise, resulting in the use of 8-digit codes today.

What is SAC Code?

SAC means Services Accounting Code a unified code that is used in measurement, recognition, and taxation of services.

The SAC has been since the earlier regime and defined by the government for the proper levy of service tax for each type of service. The same code is required to continue in the GST era.

HSN and SAC code in GST

Each product and services transactions in India are categorized under the GST regime. All services and goods are classified under the SAC code and HSN Code respectively.

The GST rate is fixed under the HSN/SAC code in five slabs that are 0 percent(%), 5 percent(%), 12 percent(%), 18 percent(%), and 28percent(%).

In the GST regime, each statement has to refer to the HSN code for all goods that are traded and the SAC code is provided for all services.

Thus, businesses should be knowledgeable of the HSN code list and the SAC code list to all the GST applicable supplies.

Most traders will be needed to adopt two, four, or eight-digit HSN codes for their products under the GST regime. Based on their turn of the previous year. Here are the detailed specifications:

● Businesses with less than INR 1.5 Crore rupees turnover is no need to use HSN code.
● Businesses with turnover between 1.5 crores INR and 5 crores INR will need to use 2-digit HSN code
● Businesses with Turnover of INR 5 Crore and above – Must be required to use 4-digit HSN code
● Import / Export – 8-digit HSN Code
● Service-5-digit SAC Code

Points to note

● Under the composition scheme, small dealers will not be required to mention the HSN / SAC code in their challans.
● The HSN / SAC code should be mentioned in the invoice and will be mentioned in the GST tax refund, which will be uploaded on the GST government portal.
● At the time of GST registration / GST migration, the HSN / SAC code of supply has to be mentioned in a trade transaction.

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