Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →
A CA articleship student mixes up HSN and SAC codes and does not know how many digits an invoice must show.
HSN classifies goods and SAC, all beginning with 99, classifies services. The code fixes the GST rate. Notification 78/2020 requires 4 digits up to ₹5 crore turnover for B2B invoices and 6 digits above.
Keep an item master with one HSN or SAC per item, digit length set by last year's turnover, and codes picked from the GST portal list.
Each invoice line carries the right code and length, and the GSTR-1 HSN summary adds up from the same master.
HSN codes classify goods; SAC codes classify services. Both tell the GST system what you sold, and the code decides the GST rate. Both must appear on your invoices and in the HSN summary of GSTR-1. A sale that includes goods and a service carries one of each.
HSN and SAC side by side
| Point | HSN code | SAC code |
|---|---|---|
| Full form | Harmonised System of Nomenclature | Services Accounting Code |
| Classifies | Goods | Services |
| Where the list comes from | World Customs Organization system, used in India’s Customs Tariff | Scheme of classification of services in the GST rate notifications |
| Structure | 2-digit chapter, 4-digit heading, 6-digit subheading, 8-digit tariff item | 6 digits, always starting with 99 |
| Example | 8443: printers | 9987: maintenance and repair services |
There are 99 chapters in the HSN tariff. SAC borrowed “99” as its starting pair so that services never clash with a goods code.
How many HSN digits must your invoice show?
Notification 78/2020-Central Tax, in force from 1 April 2021, ties the digits to last year’s aggregate turnover:
| Aggregate turnover in the previous year | Digits on invoices |
|---|---|
| Up to ₹5 crore | 4 digits on B2B invoices (optional on B2C) |
| More than ₹5 crore | 6 digits on all invoices |
| Exports | 8 digits (customs tariff) |
The same digit rule applies to the HSN summary in GSTR-1. Codes are now picked from a drop-down on the portal rather than typed in.
What if an item seems to fit two codes?
Classification follows the customs tariff’s interpretation rules. The most specific description beats a general one, and a set is classified by the item that gives it its essential character. When two GST rates are at stake, the choice matters, because a wrong code means a wrong rate. For borderline items, take advice or apply for an advance ruling. The HSN code guide walks through the method.
Worked example: printer plus maintenance contract
An office-equipment dealer in Hyderabad, turnover ₹7 crore last year, sells a laser printer with a one-year maintenance contract to a registered company.
| Line | Code | Taxable value | GST at 18 percent | Line total |
|---|---|---|---|---|
| Laser printer | HSN 844332 | ₹18,000 | ₹3,240 | ₹21,240 |
| One-year maintenance | SAC 998713 | ₹6,000 | ₹1,080 | ₹7,080 |
| Invoice total | ₹24,000 | ₹4,320 | ₹28,320 |
Because turnover exceeds ₹5 crore, both lines show 6 digits. In GSTR-1, the HSN summary gets two rows: one under 844332 for ₹18,000 and one under 998713 for ₹6,000. If the dealer had put the whole ₹24,000 under the printer code, the HSN summary would overstate goods and miss the service line entirely.
Check: ₹21,240 plus ₹7,080 equals ₹28,320. ₹3,240 plus ₹1,080 equals ₹4,320.
What to read next
- Next in this series: Why does the HSN summary in my GSTR-1 not match my sales report?
- Choosing the right code: How do I find the right HSN code for my product?
- Terms explained: GST reconciliation glossary
- GST reconciliation software: GST outward reconciliation (GSTR-1 and GSTR-3B) leads the TransactIG GST roadmap.