How to Find the Right HSN Code and SAC Code for GST

Knowing how to find the HSN code and SAC code for your products and services is more than a formality. The code decides the GST rate, appears on every invoice, is summarised in Table 12 of GSTR-1, and is one of the first things checked in a GST audit. A wrong code can mean undercharging tax, which leads to demands with interest, or overcharging, which makes you less competitive and confuses buyers. This guide explains what HSN and SAC codes are, how many digits you need, a practical step-by-step method to classify items and the mistakes that trigger disputes.

What HSN and SAC codes are

HSN (Harmonized System of Nomenclature) is an international classification for goods developed by the World Customs Organization. India uses an 8-digit version in the Customs Tariff, and GST rate notifications refer to these codes. The structure is hierarchical:

Level	Digits	Example
Section	Roman numeral (not used on invoices)	Section XVI: machinery and electrical equipment
Chapter	2 digits	84: machinery and mechanical appliances
Heading	4 digits	8471: automatic data processing machines
Sub-heading	6 digits	847130: portable machines weighing not more than 10 kg
Tariff item	8 digits	84713010: personal computers of this kind

SAC (Services Accounting Code) classifies services. SAC codes are 6 digits and all start with 99. For example, 9983 covers other professional, technical and business services, and codes under it cover legal, accounting and consulting services.

How many digits do you need?

Aggregate turnover in the previous financial year	Digits on invoices	Digits in GSTR-1 Table 12
Up to ₹5 crore	4 digits on B2B invoices; optional on B2C	4 digits
Above ₹5 crore	6 digits on all invoices	6 digits

Certain chemicals are notified for 8-digit reporting regardless of turnover. Many businesses simply store 8-digit codes in their item master and print as many digits as required, which avoids reclassifying later when turnover grows.

Step-by-step: how to find the HSN code for a product

1. Describe the product precisely. Write down what it is made of, what it does, and how it is sold. "Steel water bottle, 1 litre, insulated, sold in retail packs" is far more useful than "bottle".
2. Identify the chapter. Goods are grouped first by material or by function. Articles of steel fall in chapter 73; vacuum flasks have their own heading in chapter 96. Read the chapter notes, because they include and exclude specific items.
3. Search official tools. Use the "Search HSN/SAC" option on the GST portal (available before login), and the CBIC GST rate finder. Search with several keywords and the material name.
4. Narrow down to the heading and sub-heading. Compare the heading text with your product description. Where two headings seem to fit, the General Rules of Interpretation in the Customs Tariff decide: the more specific description wins, and for mixtures or sets, the component giving essential character decides.
5. Check the GST rate notification. Find the code in the current rate schedule. After the September 2025 rate rationalisation, most goods sit in the 5% or 18% schedules, with a 40% schedule for specified goods. Note any conditions attached to the entry.
6. Look for rulings and circulars. Advance rulings and CBIC clarifications often address disputed items. A ruling binds only the applicant, but it shows how authorities read the entry.
7. Document the decision. Record the code, rate, the source you relied on and the date in your item master notes. If a dispute arises later, this record shows good faith.
8. Ask your supplier and CA for high-value or ambiguous items, and compare with the code your supplier uses on purchase invoices.

Step-by-step: how to find the SAC code for a service

1. Describe the service by its nature, not by your trade name. "Monthly bookkeeping and GST return preparation" rather than "compliance package".
2. Open the services classification scheme in the rate notification for services, or search on the GST portal.
3. Find the group that matches the nature of service, such as 9982 for legal and accounting services or 9983 for other professional, technical and business services.
4. Select the 6-digit code that best matches. Where a contract bundles several services, identify the principal supply for composite supplies, or apply the highest rate for mixed supplies.
5. Confirm the rate and any conditions, such as rates linked to availing or not availing input tax credit.

Worked examples

Item	Reasoning	Likely code level
Laptop for resale	Portable data processing machine under 10 kg	Heading 8471, sub-heading 847130
Cotton bedsheets	Bed linen of cotton, made-up textile article	Chapter 63, heading 6302
Website development for a client	IT design and development services	SAC under 9983
Goods transport by road	Freight transport services	SAC under 9965
Accounting and bookkeeping	Accounting services	SAC under 9982

These examples show the classification path. Always confirm the full code and current rate from official sources, because rates for some of these items changed in 2025.

Why classification affects your tax bill

Suppose a trader sells goods worth ₹20,00,000 in a year and classifies them under a 5% entry when the correct entry is 18%. Tax charged would be ₹1,00,000; correct tax would be ₹3,60,000. The shortfall of ₹2,60,000 becomes payable from the trader's own pocket, because the customers have already paid, plus interest at 18% per annum from the due dates and possible penalty. The reverse error, charging 18% when 5% applies, overprices the goods and may leave customers who cannot claim credit (consumers) overpaying, with the excess tax potentially treated as tax collected that must be paid to the government.

Where the code is used

• Tax invoice: mandatory field under rule 46, at the prescribed digits. See our GST invoice format checklist.
• GSTR-1 Table 12: HSN-wise summary of outward supplies, now separated into B2B and B2C with a drop-down of valid codes. Our GSTR-1 guide covers this table.
• E-invoice and e-way bill: HSN is a mandatory field and is validated against the master on the portals.
• GSTR-9: HSN summary of outward and inward supplies in the annual return.
• Customs: importers and exporters use the 8-digit code in bills of entry and shipping bills.

Common HSN and SAC mistakes

• Classifying by trade name instead of nature. A "herbal energy drink" is classified by its composition, not by its marketing.
• Copying a competitor's code without checking whether the products are really the same.
• One code for the whole catalogue. A store selling clothes, footwear and accessories will have many codes.
• Not updating codes after rate changes or after the 2022 HS amendments that renumbered some headings.
• Mismatch between purchase and sale codes without a manufacturing reason, which invites questions.
• Ignoring the B2B and B2C split in Table 12.

Building a clean item master

1. Export your current item list and add columns for HSN or SAC, rate, source and review date.
2. Classify the top 50 items by revenue first; they carry most of the risk.
3. Group similar items and classify them together.
4. Lock the tax fields so that billing staff cannot change them on individual invoices.
5. Review the master whenever a rate notification is issued, and at least once a year.

Re-checking your codes after the 2025 rate rationalisation

The GST rate changes effective 22 September 2025 moved most goods from the old 12% and 28% slabs into 5% or 18%, and placed a limited list of goods in a 40% slab. Because the rate schedules are written by HSN entry, every business should have re-checked its item master against the new schedules. If you have not done this yet, follow this short process:

1. Export every active item with its HSN code and the rate currently applied.
2. Filter items that were at 12% or 28% before the change. These are the most likely to have moved.
3. For each, find the HSN entry in the new schedule and note the new rate.
4. Pay special attention to entries split by description or price, where part of a heading moved to one rate and the rest to another.
5. Update the master with an effective date, so invoices issued before the change keep the old rate.
6. Review stock-in-hand pricing, because consumers expect lower prices where rates fell, and your customers will ask about it.

Worked example: impact of a rate change on price

A dealer sells an item with a taxable value of ₹1,000. At the old 12% rate, the customer paid ₹1,120. If the item moved to 5%, the same taxable value gives tax of ₹50 and a price of ₹1,050. If the dealer keeps charging ₹1,120 inclusive of tax, the taxable value becomes ₹1,120 divided by 1.05, which is ₹1,066.67, and tax is ₹53.33. Both are legally possible, but buyers and regulators watch whether rate cuts are passed on, so document your pricing decisions.

HSN on purchases, imports and e-way bills

Classification is not only a sales issue. Check the HSN on your suppliers' invoices, because a supplier charging the wrong rate affects your credit and your cost. Importers must use the 8-digit tariff code in the bill of entry, and IGST on imports follows that code, so a classification decided at customs should match the one you use for resale unless you transform the goods. E-way bills require HSN for each item, and the code you print must match the invoice. Finally, keep your GSTR-9 HSN summary in mind: the annual return reports outward and inward supplies by HSN, so consistent codes across the year make it far easier to prepare.

How Fininvo helps

Fininvo ERP keeps HSN and SAC codes in a central tax rate master mapped to each item, so the correct code and rate flow automatically into invoices, e-invoices, e-way bills and the GSTR-1 HSN summary. Explore tax compliance, invoicing and pricing.

General information, not tax advice. Classification can be contentious; consult your CA or seek an advance ruling for disputed items.

Frequently Asked Questions

Is HSN mandatory for small businesses?

Businesses with aggregate turnover up to ₹5 crore must show at least a 4-digit HSN on B2B invoices and report 4-digit HSN in GSTR-1. It is optional on B2C invoices for them, but recommended.

Where can I search HSN codes officially?

Use the "Search HSN/SAC" tool on the GST portal and the GST rate finder published by CBIC. The Customs Tariff schedules give the full 8-digit structure and chapter notes.

Can two businesses use different HSN codes for the same item?

They should not, but it happens because of misclassification. If your supplier uses a different code, discuss it and check the facts. The correct code depends on the product, not on who sells it.

What is the penalty for a wrong HSN code?

If the wrong code led to short payment of tax, the tax, interest and penalties under the demand provisions apply. Where tax is unaffected, a general penalty for incorrect documents may apply. Penalty amounts depend on the facts, so consult your CA.

Do services have HSN codes?

Services use SAC codes, which are 6-digit codes starting with 99. On invoices and in GSTR-1, SAC is reported in the same field as HSN.