HSN & SAC Codes under GST (Goods and Services Tax)
Under the GST regime, every supply must be properly identified and classified. For this purpose, GST law uses HSN codes for goods and SAC codes for services. These codes determine the applicable tax rate, compliance requirements, and reporting accuracy.
What is HSN Code in GST?
HSN (Harmonised System of Nomenclature) is a globally recognised system for classifying goods. India follows this system under GST to ensure consistency in taxation across states and countries.
HSN codes are used to identify:
- Manufactured goods
- Traded items
- Machinery and equipment
- Finished and semi-finished products
Whenever goods are supplied, the correct HSN code must be mentioned on the tax invoice and GST returns.
What is SAC Code in GST?
SAC (Services Accounting Code) is used to classify services supplied under GST.
If a business earns income by providing:
- Professional or consultancy services
- Technical or IT services
- Renting or leasing services
- Contractual or manpower services
Then SAC code becomes mandatory for invoicing and return filing.
HSN vs SAC – Key Difference
| Particular | HSN Code | SAC Code |
|---|---|---|
| Applicable to | Goods | Services |
| Nature | Tangible | Intangible |
| Used by | Traders / Manufacturers | Service Providers |
| Digits | 2 / 4 / 6 / 8 | Fixed 6 digits* |
| Example | Medicines, Machines | Accounting, Legal Services |
HSN Code Length Requirement under GST
The number of HSN digits depends upon aggregate annual turnover.
| Turnover Limit | HSN Digits Required |
|---|---|
| Up to ₹5 Crore | 4 digits |
| Above ₹5 Crore | 6 digits |
| Export / Import | 8 digits |
Understanding SAC Code Structure
SAC codes consist of six digits, arranged systematically:
- Last two digits – Detailed classification
- First two digits – Major service category
- Next two digits – Nature of service
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