Whether you are dealer of goods or services, the GST laws require you to make invoices with the corresponding HSN codes for products or SAC codes for services.
HSN stands for Harmonized System of Nomenclature and is an internationally known method of naming, classifying and identifying products. In India HSN codes are used to identify goods and calculate GST.
You should mention these codes when you register for GST, on your invoices and in your GST returns.
The HSN list comprises about 5,000 commodity groups, each identified by a six-digit code, arranged in a structure that takes into account logic and legal necessities. It is defined by solid rules to achieve uniform classification.
The HSN system is used in over 200 countries around the world. These codes are used because it is much more convenient to have a uniform classification, they offer a base for their customs tariffs and HSN codes simplify the collection of international trade statistics.
NOTE: Over 98% of the merchandise available in international trade is classified under the HSN structure.
The Harmonized System of Nomenclature number for each commodity is accepted by most of the countries, and the HSN number is the same for almost all goods. In some cases, the HSN nuumber varies based on the nature of the goods classified.
The HSN structure contains 21 sections that have 99 chapters, about 1244 heading and 5224 heading. Yes, that is a lot, and it all makes logical sense.
Section and Chapter titles describe general categories of goods, while headings and subheadings describe products in detail.
Let’s take an example to understand this a bit more.
Nylon Moulding Powder, HSN code 39.08.90.10
SAC or Service Accounting Codes are unique codes provided to recognise, measure and appropriately tax services.
Legal documentation and certification services concerning patents, copyrights and other intellectual property rights - 998213.
HSN codes to be declared
No. of digits of HSN to be declared
1.5 crore- 5 crore
More than 5 crore
Businesses with an annual turnover smaller than Rs. 1.5 Crores do not have to use HSN codes to sell goods. Along with them, a business registered under the composition scheme is also not required to mention HSN codes on invoices.
UQC stands for Unique Quantity Code. In simple terms, this means it is a unit of measurement. A more practical example is 1 liter of oil. In GST, any tax invoice, credit note, debit note must have UQC or quantity unit description, for example, 100 meters of fabric.
Due to the diversity of goods, HSN codes have been categorised in chapters. Have a look at the table below to identify under which category your products fall and use this website
https://cbic-gst.gov.in/gst-goods-services-rates.html to identify the HSN code list for GST you need for your business in India.
Live Animals, Bovine & Poultry
Meat & Edible Offal of Animals
Fish Meat & Fillets
Eggs, Honey & Milk Products
Non Edible Animal Products
Live Trees & Plants
Fruits & Dry Fruits
Tea, Coffee & Spices
Milling Industry Products
Oil Seeds, Fruit & Part of Plants
Gums, Resins, Vegetable SAP & Extracts
Vegetable Material & Products
Fats, Oils & Waxes their Fractions
Preserved/Prepared Food Items
Sugar, Jaggery, Honey & bubble Gums
Chocolate & Cocoa Products
Pizza, Cake, Bread, Pasta & Waffles
Edible Plants - Fruits, Nuts & Juices
Tea & Coffee Extract & Essence
Water - Mineral & Aerated
Flours, Meals & Pellets
Tobacco, Stemmed & Stripped
Mineral Ores & Slags
Fossil Fuels - Coal & Petroleum
Gases & Non Metals
Hydrocarbons - Cyclic & Acyclic
Tanning & Colouring Products
Essential Oils, Beauty Products
Soaps, Waxes, Polish products
Casein, Albumin, Gelatin, Enzymes
Propellants, Explosives, Fuses, Fireworks
Photographic & Cinematographic Films
Insecticides, Artificial Carbon & Graphite
Polymers, Polyethylene, Cellulose
Rubber, Plates, Belt, Condensed Milk
Raw hides & Skins, Leather
Trunks, Suit-cases, Vanity cases
Raw Fur Skins, Articles of apparel
Fuel wood, Wood Charcoal
Natural Cork, Shuttlecock Cork
Plaiting Materials, Basketwork
Mechanical & Chemical woodpulp
Newsprint, Uncoated paper & paperboard
Printed Books, Brochures, Newspapers
Silk Worm Cocoon, Yarn, Waste & Woven Fabrics
Wool materials & Waste, Animal Hairs
Cotton materials, Synthetics & Woven fabrics
Flex raw, Vegetable materials & Paper yarn
Synthetic felaments, Woven fabrics & Rayons
Synthetic felament tows & Polyster staple fiber
Towels, Napkins, ropes & Netting materials
Carpets & Floor coverings textile Handlooms
Labels, Badges, Woven pile & Chennile, Terry towelings
Rubberised textile fabrics, Convayer belts
Pile,Wrap Knit,Tarry & Croched fabrics
Men & Women Clothing
Men & Women Jackets, Coats & Garments
Shoes & Footwear Products
Artificial flowers, Wigs & False Beards
Monumental & Building Stones
Bricks, Blocks & Ceramics
Glasses, Mirrors, Flasks
Pearls, Diamonds, Gold, Platinum
Iron, Alloys, Scrap & Granules
Iron tube, piles & Sheets
Copper Mattes, Rods, Bars, Wires, Plates
Nickel Mattes & Unwrought Nickel
Unwrought Aluminium- Rods, Sheets & Profiles
Unwrought Lead - Rods, Sheets & Profiles
Unwrought Zinc - Rods, Sheets & Profiles
Unwrought Tin - Rods, Sheets & Profiles
Magnesium, Cobalt, Tungsten Articles
Hand Tools & Cutlery
Locks, Metal Mountings & Fittings
Hand Tools & Cutlery
Locks, Metal Mountings & Fittings
Electrical Parts & Electronics
Railway Locomotives & Parts
Tractors & Motor Vehicles
Balloons, Parachutes & Airlift Gear
Cruise Ships & Boats
Medical, Chemical & Astronomy
Military Weapons & firearms
Furniture, Bedding & lighting
Children Toys, Table & Board Games & Sports Goods
Pencil Lighter Toiletries
Paintings Decoratives Sculptures
Machinery Lab Chemicals Drugs Medicines
Along the correct HSN and SAC codes, you need to add the correct GST tax rates to your items to ensure your invoices are correct.The GST tax structure has been set as follows:
Tax Rate
Description
Zero rate, applied to half of the items in the consumer price index(CPI) basket, such as food grains, cereal and other food essentials.
Cut and semi-polished stones fall under this tax slab. (modified from 3% to 0.25% by the GST Council)
Lower rate, applied to the rest of the items in the CPI basket plus other items of mass consumption.
Standard rate, applied to products such as processed foods and computers.
Products such as capital goods, hair oil, toothpaste and soaps, and industrial intermediaries fall under this tax slab.
Higher rate, applied to luxury items such as small and premium cars, cigarettes and aerated drinks, high end motorcycles, refrigerators and AC's plus other consumer durables.
We hope this article helped you understand more about HSN and SAC codes for your business. Be sure to stay up to date with the latest news on GST. Keep your life easy and let Sleek Bill GST ready billing software handle your invoicing problems.
GST, short for Goods and Services tax, is a new tax that will be imposed on the sale and purchase of goods and services in India. GST is meant to replace all taxes in India with a single unified tax applied to value addition instead of the total value of the product at each stage in the supply chain.
This method provides credit for the input tax paid on the purchase of goods and services, which can be offset with the tax to be paid on the supply of goods and services. As a result, this reduces the overall manufacturing cost, with the end customer paying less.
With certain current taxes remaining, the following goods and services will be fully or partially exempted from the GST
Free movement of goods: Business owners will be able to sell more in other states without having to worry about interstate transaction costs. With GST, the entry tax will be eliminated, which will save time and money spent.
Currently, there are many indirect taxes that both the state and central governments are collecting on every purchase and sale.
The GST will follow a similar model with the one before it
GST will have a 4-tier tax structure
One of the main reasons for GST being introduced in India is the tax burden that falls both on companies and consumers. With the current tax system, there are multiple taxes added at each stage of the supply chain, without taking credit for taxes paid at previous stages. As a result, the end cost of the product does not clearly show the actual cost of the product and how much tax was applied. This cascading structure is too complex and inefficient.
For inter-state transactions, the Centre will levy Integrated GST (IGST), which is equal to the average of the CGST and SGST rates. After applying IGST, CGST and SGST credits received from purchases, the seller will then pay the remaining IGST on the added value.
Businesses with turnover revenue of 20 lakhs and above will have to register and file for GST returns, with a threshold of 10 lakhs for businesses in the north east and hill states.
A combination of CGST and SGST will be applied to the import of goods and services that come to India. Tax benefits and credits will be given to the state where the imported goods and services are consumed.
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