Description of HSN and SAC code in GST

In GST regime each invoice should mandatory mention HSN code for each item sold or SAC code of each services provided to the client. As GST is implemented, it is important for us to understand how new concept of HSN and SAC codes in GST will work and the effects of it for you and your business.

What is HSN code in GST India

HSN in full form known as Harmonized System of Nomenclature. It is the codification of all the trading goods into specific sections with each chapter having commodity of similar nature.

Each commodity or goods traded all around the world are called by different names to language differences. In the same way IT-enabled multinational trade gives a unique code to each and every class of tradable commodity based on its nature and general usage. This practice is known as HSN code which is now mandatory to include in invoice for goods and for filing GST returns.

What is SAC code in GST India

Similarly like HSN code, each and every type of service provided is given an unique code for recognition, measurement and taxation purposes. The name for these codes is SAC codes. The old service tax regime also had SAC codes predefined defined for each type of service.

HSN / SAC under GST 2017:

Under GST regime, almost all of dealers will have to adopt two-, four-, or eight-digit HSN codes for their commodities, based on their turnover the previous year:

Businesses having turnover below Rs 1.5 crores will not be required to use HSN codes for commodities they sell.

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Businesses having turnover between Rs 1.5 crores and Rs 5 crores will be required to use two-digit HSN codes for commodities they sell.

Businesses crossing Rs 5 crores and above shall be required to use four-digit HSN codes for the commodities they sell.

In the case of imports/exports, HSN codes of eight digits is mandatory, as GST in India has to be compatible with global standards. You can download the HSN codes and check your HSN code for your business in the GST website

Small dealers coming under composition scheme will not have to mention HSN codes in invoices they generate for their customers.

HSN should be mentioned in Invoice and mentioned in the GST tax returns while uploading on GST portal.

Small businesses under composition scheme will not be required to mention HSN codes in their invoices

At the time of registration/migration, the business taxpayer must mention HSN code of the goods his company or firm deals with during GST registration process.

Services will have classification based on Services Accounting Code (SAC). There are Service accounting codes already issued from government for Service tax since the Service tax regime. This is same in GST regime as well.