The Key Differences Between HSN Code & SAC Code
The Key Differences Between HSN Code & SAC Code
The GST in India classifies all taxable goods and services by utilising HSN codes (Harmonized System of Nomenclature) and SAC codes (Service Accounting Code). These codes are crucial in facilitating international trade by eliminating potential barriers. Additionally, HSN and SAC codes are incorporated into GST invoices and record-keeping processes, streamlining the identification of products and services. This article explores the Key Differences Between the HSN Code & and the SAC Code within the context of GST.
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Find GST rate, HSN & SAC code!HSN Code
“HSN code” refers to the Harmonized System of Nomenclature code, a comprehensive international product classification system. Initially proposed by the World Customs Organization (WCO), this unique code was designed to classify goods worldwide uniformly. In 1986, India adopted HSN codes for categorizing goods and items in the context of Customs and Central Excise tariff duty. The HSN tariff numbers used in GST invoices align with the same classification utilized for Customs purposes.
Structure of HSN Code in GST
In GST, the HSN code is a numerical classification system that begins with a 6-digit code.
For clarity, Customs and Central Excise authorities have added 2 extra digits, resulting in 8 digits in the defined HSN code.
- The first two digits of the HSN code signify the GST chapter number.
- The next two digits in the HSN code denote chapter headings.
- The subsequent two digits indicate subheadings.
- The final two digits in the HSN code represent further subheadings.
The classification of goods within the HSN code spans 21 sections, 99 chapters, 1244 headings, and 5224 subheadings.
HSN Code Applicability Requirements:
Indian manufacturers are mandated to adhere to a 3-tiered structure of HSN based on annual turnover.
| Sl No. | HSN Code | Annual Turnover |
| 1. | 0 | Less than Rs. 1.5 crore |
| 2. | 2 | Between Rs. 1.5 crores – 5 crores |
| 3. | 4 | More than 5 crores |
- Taxpayers with an annual revenue below Rs. 1.5 crores are exempt from using HSN codes.
- Those with annual revenues surpassing 1.5 crores but below 5 crores must utilize a two-digit HSN code.
- Businesses generating annual revenue exceeding 5 crores must employ a 4-digit HSN number.
- Individuals managing import and export activities must adhere to the eight-digit HSN code.
21 Sections of the HSN Code
Let us understand the 21 sections of the HSN code:
| Sr No. | Section | Products List |
| 1. | Section 1 | Live Animals |
| 2. | Section 2 | Vegetables and their products |
| 3. | Section 3 | Animal or vegetable fats |
| 4. | Section 4 | Prepared foodstuffs, Manufactured Tobacco |
| 5. | Section 5 | Mineral products |
| 6. | Section 6 | Chemical products |
| 7. | Section 7 | Plastic and rubber products |
| 8. | Section 8 | Raw hides and skins, Leather, Furskins and articles thereof, saddlery and harness, travel goods, handbags, and similar containers, articles of animal gut (other than silkworm gut) |
| 9. | Section 9 | Wood and articles of wood, Wood charcoal, Cork and articles of cork, Manufacturers of straw, of Esparto or Other Plaiting Materials |
| 10. | Section 10 | The pulp of wood or other Fibrous Cellulosic Material, Recovered (Waste and scrap) paper or paperboard, paper and paperboard, and articles thereof. |
| 11. | Section 11 | Textile |
| 12. | Section 12 | Footwear, Headgear, Umbrellas, Sun Umbrellas, Walking-sticks, seat sticks, whips, riding crops, and parts thereof, Prepared feathers and articles made therewith, Artificial flowers, and Articles of human hair. |
| 13. | Section 13 | Articles of stone, plaster, cement, asbestos, mica, or similar materials, ceramic products, glass and glassware |
| 14. | Section 14 | Natural or cultured pearls, Precious or semi-precious stones, precious metals, Metal clad with precious metal, and articles thereof, Imitation Jewellery, Coins |
| 15. | Section 15 | Base Metals and Articles of Base Metal |
| 16. | Section 16 | Machinery and mechanical appliances, electrical equipment, parts thereof, sound recorders and reproducers, television image and such recorders and reproducers, and Parts and Accessories of such article |
| 17. | Section 17 | Vehicles, Aircraft, Vessels and Associated Transport Equipment |
| 18. | Section 18 | Optical, Photographic, Cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus, clocks and watches, musical instruments, parts and accessories thereof |
| 19. | Section 19 | Arms and ammunition, parts and accessories thereof |
| 20. | Section 20 | Miscellaneous Manufactured Articles |
| 21. | Section 21 | Works of art, Collectors’ Pieces, and Antiques |
How to find HSN code
To find an HSN code for a product, follow these steps:
Select the Appropriate Chapter:
Identify the relevant chapter that broadly categorizes the product. The HSN code for Aerated water falls under Chapter 22 in the example.
Select Section:
Within the chosen chapter, determine the specific section applicable to the product. In the example, the section is represented by 02.
Filter Subheading:
Further, narrow the classification by choosing the subheading that best describes the product. For Aerated water, the subheading is 10.
Get the Product Code:
Finally, combine the chapter, section, subheading, and any additional subheading to obtain the complete HSN code. In the example, the HSN code for Aerated water is 22021010.2202, where 22 is the Chapter, 02 is the Section, 10 is the subheading, and 10 is a further subheading.
What is the SAC code?
The SAC code, or Services Accounting Code, is a classification system developed by the GST Department of India for all services. It plays a crucial role in fixing GST rates on services, categorizing them into five slabs of 0%, 5%, 12%, 18%, and 28%. In India, over 120 services are roughly categorized under these five tax slabs for the levy of GST.
- SAC codes consist of 6 digits, with the first 2 digits (99) common for all services.
- The subsequent 2 digits indicate the major nature of the service, while the last 2 digits specify the detailed nature of the service.
- This structured coding system facilitates the efficient classification and taxation of a wide range of services, ensuring clarity and consistency in the GST framework.
The Key Differences Between HSN Code & SAC Code
The Key Differences Between the HSN Code & SAC Code are tabulated here:
| S.No. | Parameters | HSN | SAC |
| 1. | Full Form | Harmonized System of Nomenclature | Services Accounting Code |
| 2. | Structure | HSN assists in determining applicable GST Rates for goods. | SAC assists in determining service-specific GST rates. |
| 3. | Issued by | World Customs Organization (WCO) has issued HSN codes. | Central Board of Excise and Customs (CBEC) has issued SAC codes. |
| 4. | Used for | 8-digit code | 6-digit code |
The major difference lies in the purpose and structure of HSN and SAC codes. HSN codes are utilized to classify goods under the Goods and Services Tax (GST), with the World Customs Organization issuing these 8-digit codes. On the other hand, SAC codes, which are 6-digit codes, are employed to categorize services and issued by the Central Board of Excise and Customs (CBEC) department.
Where Should I Mention the HSN/SAC Code?
The HSN (Harmonized System of Nomenclature) code for goods and the SAC (Services Accounting Code) for services must be mentioned in several instances as part of GST compliance:
Registration for GST:
Businesses registering for GST must disclose the category of products and services they deal with. Therefore, providing the accurate HSN code for goods or SAC code for services during registration is crucial.
Register Now!GST Rate Determination:
Knowledge of the HSN/SAC code enables taxpayers to quickly determine the applicable GST rate for the goods or services they are dealing with.
GST Invoice:
Sellers generating GST invoices for goods and services must include the relevant HSN or SAC code. This code is essential for accurate classification and taxation, and it helps in providing detailed information about the products and services being supplied.
Generate e-Invoice Instantly with IndiaFilings!GST Returns:
The HSN Summary, which includes details about the products and services sold, categorized according to the reported HSN or SAC, must be a part of the GST return submitted by the taxpayer. This ensures transparency and compliance with GST regulations.
File Now!Why are the SAC Code & HSN Code important for business?
SAC (Services Accounting Code) and HSN (Harmonized System of Nomenclature) codes play a crucial role in the GST (Goods and Services Tax) system in India. Their importance for businesses stems from several key factors:
- GST Compliance: SAC and HSN codes are fundamental for GST compliance. They help businesses accurately classify their products and services, ensuring adherence to the GST framework.
- Tax Rate Determination: SAC and HSN codes aid in determining the applicable GST rates for services and goods, respectively. This is crucial for businesses to calculate and collect the correct amount of GST.
- GST Registration Requirement: Businesses must provide SAC and HSN codes during the GST registration process. Accurate coding is essential for precisely defining the nature of business activities and the types of goods or services dealt with.
- GST Invoice Generation: It is mandatory when businesses generate invoices for goods and services, including the respective SAC and HSN codes.
- GST Returns: The HSN Summary and SAC Summary in GST returns provide a detailed account of the goods and services transacted by a business. This information is essential for filing accurate GST returns.
- Uniform Classification: SAC and HSN codes provide a standardized and internationally recognized system for classifying services and goods. This uniform classification simplifies the communication of product and service information across businesses and regulatory authorities.
- International Trade: HSN codes are particularly important for businesses engaged in international trade as they align with global standards, facilitating smoother cross-border transactions and reducing trade barriers
- Audit and Record-Keeping: Proper coding with SAC and HSN ensures that businesses maintain accurate records, which is crucial for internal audits, compliance checks, and transparency to tax authorities.
In summary, SAC and HSN codes are integral to the GST framework, promoting transparency, accuracy, and uniformity in the classification and taxation of goods and services, ultimately contributing to efficient business operations and compliance.
Easily Get GST Tax Rates and HSN & SAC Codes for your Products:
IndiaFilings provides a user-friendly tool for businesses to easily find GST tax rates, HSN codes, or SAC codes for more than 20,000 goods and services. This tool simplifies classifying items and ensures accurate compliance with GST regulations. Businesses can efficiently identify the relevant HSN or SAC code, streamlining invoicing, record-keeping, and tax filing processes for enhanced precision in tax management.
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