HSN & SAC Code in GST: Full Guide India 2026

What Are HSN and SAC Codes?

HSN (Harmonized System of Nomenclature) is an international product classification system developed by the World Customs Organization (WCO) in 1988. India adopted it under GST to ensure uniform classification of all goods across states and align with global trade standards.

SAC (Service Accounting Code) is the Indian counterpart for services. Every service supplied under GST carries a SAC code, always beginning with "99".

HSN Code Structure (8 Digits)

SAC Code Structure (6 Digits)

The deeper the digit count, the more specific the classification. A 4-digit code covers a broad category; an 8-digit code pinpoints the exact item with its applicable GST rate.

How Many Digits Must You Report?

CBIC Notification No. 78/2020, Central Tax (dated October 15, 2020), sets mandatory HSN/SAC digit requirements based on your Aggregate Annual Turnover (AATO) in the preceding financial year.

Why "optional" for B2C below Rs 5 crore? CBIC clarified via an advisory in May 2025 that HSN reporting in GSTR-1 for B2C supplies is optional for taxpayers with turnover up to Rs 5 crore. The rationale: small retailers selling to consumers do not typically track item-level HSN codes. However, B2B invoices always require HSN because the buyer needs the code to claim ITC correctly.

Practical tip: Even if optional, reporting HSN on B2C invoices helps during GST audits and reconciliation. It costs you nothing at filing time and saves time during scrutiny.

GSTR-1 Table 12: Phase-III Changes (April 2025 Onward)

GSTN implemented Phase-III changes to Table 12 of GSTR-1 and GSTR-1A from April 2025. These changes affect every registered taxpayer.

What Changed

1. Two separate tabs: Table 12 is now split into B2B and B2C sections. Earlier, both were reported together.

2. Dropdown-only selection: Manual entry of HSN codes is no longer allowed. You must select from a pre-defined dropdown list maintained by GSTN.

3. "My HSN Master" feature: You can save your frequently used HSN codes in a master list. Once saved, selecting a code auto-populates the description, UQC (Unit Quantity Code), and quantity fields.

4. Download option: A "Download HSN Codes List" button lets you export the full list of valid HSN/SAC codes with descriptions as an Excel file.

5. Table 13 now mandatory: From May 2025, Table 13 (document details) cannot be left blank if you report B2B or B2C supplies in any table of GSTR-1.

Step-by-Step: How to Report HSN in GSTR-1 Table 12

Step-by-Step Guide

HSN Reporting in GSTR-1 Table 12

Phase-III workflow from April 2025 onward

1

Open GSTR-1 dashboard

Login to GST portal, go to Returns > GSTR-1 for the relevant period.

Start

2

Navigate to Table 12

Select the B2B or B2C tab depending on the supply type.

Select

3

Click Add HSN

Use the dropdown to search and select the correct HSN/SAC code. Manual entry is blocked.

Classify

4

Verify auto-populated fields

Description, UQC, and rate fields auto-fill. Confirm they match your invoice.

Verify

5

Enter quantity and values

Fill taxable value, IGST/CGST/SGST amounts. The system validates against other tables.

Complete

6

Save and file

Review the HSN summary. Ensure totals match your invoice-level data in Tables 4-9.

File

How to Find the Right HSN or SAC Code

Method 1: GST Portal HSN/SAC Search Tool

The official tool at services.gst.gov.in/services/searchhsnsac lets you search by keyword or code number. Enter "rice" and it returns all rice-related HSN codes with their GST rates.

Method 2: CBIC Tariff Schedule

The full tariff schedule at cbic-gst.gov.in/gst-goods-services-rates.html lists every HSN chapter with applicable rates. This is the authoritative source. When in doubt, this is where your CA or tax consultant will verify.

Method 3: GSTR-1 Dropdown (Phase-III)

From April 2025, the GSTR-1 filing interface itself provides a searchable dropdown. Type the product description, and matching HSN codes appear. This is the fastest method during return filing.

Method 4: Customs Tariff Cross-Reference

Since HSN codes in GST align with the Customs Tariff Act, 1975, you can cross-reference using the Customs tariff if your product has an import/export history.

Common HSN Code Chapters (Quick Reference)

Note: Rates shown are indicative. Always verify the specific 4/6/8-digit code for the exact rate applicable to your product.

Common SAC Code Groups (Services)

Consequences of Wrong HSN/SAC Classification

Using the wrong code is not a paperwork issue. It has real financial consequences.

For the supplier:

• Wrong HSN leads to wrong GST rate on the invoice
• GSTR-1 data mismatch with GSTR-3B tax liability
• Scrutiny notice under Section 61 (now Section 70 under new GST law) for discrepancies
• Penalty under Section 122 for incorrect invoicing: up to Rs 25,000 per return or the tax amount, whichever is higher

For the buyer:

• If your supplier uses the wrong HSN, the invoice may not appear correctly in your GSTR-2B
• ITC reversal risk if the rate on your purchase invoice does not match the HSN-rate mapping in the GST system
• During audit, officers cross-verify HSN codes on invoices against the product description. A mismatch raises questions about the entire transaction.

Why this matters for SMEs: If you sell "readymade garments" (HSN 6109, 5% GST up to Rs 1,000 per piece) but classify them under "textiles" (HSN 5208, 5% GST on fabric), the rate may happen to be the same, but the classification is still wrong. When rates change (as they did in January 2022 for garments), a wrong HSN means you collect the wrong rate and face differential liability.

Practical Compliance Checklist

Use this checklist every quarter to ensure your HSN/SAC reporting stays clean:

• Verify your AATO bracket (below or above Rs 5 crore) for the preceding FY
• Confirm 4-digit or 6-digit requirement applies to your invoices
• Map every product/service you sell to the correct HSN/SAC code using the CBIC tariff
• Update your billing software with correct codes (manual codes are rejected on the portal)
• Set up "My HSN Master" on the GST portal with your frequently used codes
• Cross-check Table 12 totals against Table 4/5/6 invoice-level data before filing GSTR-1
• Review any new CBIC notifications for rate or classification changes (especially after GST Council meetings)

Frequently Asked Questions

Q: Can I use a 2-digit HSN code on my invoice? No. The minimum is 4 digits for businesses with turnover up to Rs 5 crore, and 6 digits for those above Rs 5 crore. Two-digit chapter numbers are for reference only.

Q: My product falls under two possible HSN codes. Which one do I use? Apply the General Rules for Interpretation (GRI) in the Customs Tariff Act. Rule 1 says classify based on the terms of the heading. If still ambiguous, Rule 3(a) says the more specific heading prevails over the general one. When uncertain, seek a ruling from the Authority for Advance Rulings (AAR) under GST.

Q: Is HSN mandatory for composition scheme dealers? Yes. Composition dealers filing CMP-08 must also report HSN codes in their annual return GSTR-4. The 4-digit requirement applies regardless of turnover for composition dealers.

Q: What happens if I select the wrong HSN from the dropdown in GSTR-1? You can amend it in the next period's GSTR-1 or through GSTR-1A (amendment return). However, if the wrong HSN led to a wrong rate, you will need to issue a credit note or debit note and adjust the tax liability.

Q: Do exports require HSN codes? Yes. Exports must carry the 8-digit HSN code, aligned with the Customs Tariff, for proper classification at the port and for claiming refund under LUT/bond.

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Source: CBIC Notification No. 78/2020-Central Tax (15 October 2020); GST Portal HSN/SAC Search Tool (services.gst.gov.in); GSTN Advisory on Table 12 Phase-III changes (April 2025); Customs Tariff Act, 1975, First Schedule. All rates and thresholds verified as of June 2026.