HSN and SAC codes: naming what you sell

Find the code for what you sell, and know why getting it right decides the rate you charge.

5 min read

On a GST invoice, every line carries a short number next to its description. For goods it is an HSN code; for services, an SAC code. It looks like paperwork. It is actually the line that decides how much tax you charge.

What the codes are

HSN (Harmonised System of Nomenclature) is an international system for classifying goods. India uses it for GST. "Cotton shirt", "biscuits" and "steel pipe" each sit somewhere in it.
SAC (Services Accounting Code) is India's equivalent for services — tailoring, repairs, consulting, transport.

The codes are arranged like a tree. The first digits name a broad chapter (textiles, food, machinery); each extra pair of digits narrows it down.

Why it matters: the rate follows the code

GST rates are not set by what you call your product. They are set against the code. Two things that look alike to you — say, two kinds of packaged snack — can sit under different codes and carry different rates.

So the order is:

Work out what you sell, accurately.
Find its code.
The rate follows from the code.

The common mistake is choosing the rate first — the one a competitor charges, or the lowest that sounds plausible — and picking a code to fit. If the code is wrong, the tax is wrong, and the difference is yours to pay later, with interest.

How to find yours

Your supplier's invoice. If you resell what you buy without changing it, your supplier's invoice usually already shows the code. Start there — but check it, don't copy blindly.
The GST portal's HSN/SAC search. Search by a word describing the product and read down the tree until the description matches what you sell.
Your CA. For anything made of several materials, a mix of goods and service, or where two codes both look right, ask. This is exactly what you pay a CA for.

How many digits

The code can be written at different lengths — a short code names a broad group, a longer one names the item precisely. How many digits you must print depends on your turnover and who you sell to, and the rule has changed before. Check the current requirement on the GST portal or with your CA, rather than going by what another business prints.

When you make something

If you buy materials and turn them into something else — cloth into garments, flour into biscuits — your product has its own code, different from your materials'. Don't carry the supplier's code onto your invoice.

When you sell a mix

A gift hamper, a meal with a drink, a machine installed by your team: when goods and services or several goods are sold together, which code applies depends on how the sale is made up. Different treatments can mean different rates. This is a question for a CA before you start, not after the first return.

Keep a simple list: each product or service you sell, its code, its rate, and where you checked it. When you add a product, add a line. That list is what makes every future invoice quick and consistent.

Getting it wrong

If you discover a wrong code, don't just change it quietly from the next invoice. Past invoices may have charged the wrong tax. Talk to your CA about putting it right, which may mean issuing credit or debit notes — the next lesson.

The invoice maker below has a field for the code on every line, so each invoice you make carries it.