HSN vs SAC Codes: Key Differences, Full Forms & Rules
Clear, comprehensive guide to classifying goods and services under India’s GST law. Understand what HSN and SAC stand for, the 4/6/8-digit turnover thresholds under Notification 78/2020, why all services begin with 99, and how to avoid costly invoicing penalties.
HSN
For Tangible Goods (2 to 8 Digits)
SAC
For Services (Always 6 Digits • 99 Prefix)
₹5 Crore
AATO Threshold for 6-Digit Mandate
₹25,000
Max Penalty for Wrong Code (Sec. 125)
✅ CBIC Notification 78/2020 Compliant
⏱ 7 min read
👤 Reviewed by Indirect Tax Editorial Team
The Fundamentals: What Are HSN and SAC Codes?
Under the Indian Goods and Services Tax (GST) system, every commercial item sold or service rendered must be classified into a standardized numerical code. This ensures uniform tax rates across states, simplifies automated tax reporting, and prevents classification disputes between taxpayers and the tax department.
These classification codes are divided into two distinct systems based on whether the transaction involves tangible commodities (Goods) or intangible activities (Services):
For Physical Goods
HSN Code
Harmonized System of Nomenclature
An internationally accepted multi-purpose goods classification standard developed by the World Customs Organization (WCO) in 1988. Adopted by over 200 countries covering more than 98% of world trade. India uses HSN codes with 2, 4, 6, or 8 digits.
Primary Scope:Tangible Products & Commodities
Global Authority:World Customs Organization (WCO)
Digit Length:4, 6, or 8 Digits in GST
Example:8471.30.10 (Laptops)
For Intangible Services
SAC Code
Services Accounting Code
A specialized classification system created by India’s Central Board of Indirect Taxes and Customs (CBIC), modeled on the United Nations Central Product Classification (UNCPC). Every SAC code in India is uniformly 6 digits and always starts with the prefix 99.
Primary Scope:Services & Professional Works
Statutory Authority:CBIC, Ministry of Finance, India
Digit Length:Strictly 6 Digits
Example:998314 (IT Consulting Services)
Code Structure Anatomy: How HSN and SAC Are Built
Understanding the internal structure of these codes makes it easy to read tax invoices, identify your product category, and choose the correct digit depth for your GST filings.
Structural Breakdown: Goods (HSN) vs Services (SAC)
Notice how HSN codes represent a hierarchical tree of chapters and subheadings, while SAC codes always begin with Chapter 99.
HSN Structure: 8471 30 10 (Personal Computer)
84
Chapter
71
Heading
30
Subheading
10
Tariff Item
Digits 1-2 (84): Chapter 84 — Machinery and mechanical appliances
Digits 3-4 (71): Heading 8471 — Automatic data processing machines
Digits 5-6 (30): Subheading — Portable digital computers ≤ 10kg
Digits 7-8 (10): Indian Regional Item — Personal Computer (PC)
SAC Structure: 99 83 14 (IT Consulting)
99
Services
83
Group
14
Tariff Service
Digits 1-2 (99): Statutory prefix reserved for ALL services under GST
Digits 3-4 (83): Group 9983 — Other professional, technical & business services
Effective from 1st April 2021, the Ministry of Finance enforced Notification No. 78/2020-Central Tax, amending Rule 46(g) of the CGST Rules, 2017. This notification strictly ties the required number of HSN digits to the taxpayer’s Aggregate Annual Turnover (AATO) in the preceding Financial Year:
HSN/SAC Digit Thresholds by Turnover
Turnover Up To ₹5 Crores
Small & Medium MSMEs
B2B Invoices: Minimum 4 Digits mandatory
B2C Invoices: Optional (4 digits recommended)
Services (SAC): 6 Digits on B2B supply
Exports / Imports: 8 Digits mandatory
Turnover Above ₹5 Crores
Large Businesses & Enterprises
B2B Invoices: Minimum 6 Digits mandatory
B2C Invoices: Minimum 6 Digits mandatory
Services (SAC): 6 Digits on all invoices
Special Chemicals: 8 Digits mandatory (Notification 90/2020)
Mandatory 8-Digit HSN Notification 90/2020: Regardless of business turnover, CBIC Notification No. 90/2020-Central Tax mandates that 49 specific chemical products (including organic chemicals, explosive materials, and plastics) must always have the full 8-digit HSN code declared on every tax invoice.
Interactive Code Identifier & Validator
Not sure if a classification code belongs to Goods (HSN) or Services (SAC)? Enter any code below to instantly inspect its classification group, digit depth, and statutory invoice rules:
Instant HSN / SAC Code Inspector
Type any 2, 4, 6, or 8 digit code (e.g. 998314, 8471, 6109, 995411):
Looking for a specific product or service code? Search our complete directory of over 10,000+ items on the Free HSN Code Finder Tool.
Consequences of Incorrect HSN or SAC Reporting
Many business owners mistakenly believe that minor classification errors are inconsequential. However, under GST audit scrutiny, incorrect or missing HSN/SAC codes trigger severe legal and financial repercussions:
General Penalty under Section 125 of CGST Act: A general penalty of up to ₹25,000 under CGST plus ₹25,000 under SGST (total ₹50,000) can be levied for failing to state mandatory invoice details prescribed by Rule 46.
E-Way Bill Blocking & Transit Detention: An incorrect or missing HSN code can cause E-Way Bill generation errors. Goods in transit with mismatched HSN codes risk vehicle detention under Section 129 of the CGST Act, requiring a 200% penalty of the tax payable to release the consignment.
Input Tax Credit (ITC) Rejection for Clients: If your buyer undergoes a GST audit and their supplier’s invoice contains an invalid or non-compliant 2-digit HSN code, the tax officer may disallow their Input Tax Credit under Section 16(2)(a), damaging your business relationship.
GSTR-1 Table 12 Rejection: The GST common portal automatically cross-validates Table 12 (HSN-wise summary of outward supplies). Invalid codes cause filing rejections and delay return submissions.
Automate Your Invoicing: Eliminate human error by creating your tax invoices using our Free GST Invoice Generator. It automatically matches HSN/SAC codes with current GST rates and formats compliant Rule 46 PDF bills in under 60 seconds.
Frequently Asked Questions (FAQs)
The primary difference is that HSN (Harmonized System of Nomenclature) codes are used to classify physical goods and commodities, whereas SAC (Services Accounting Code) codes are used exclusively to classify services and intangible professional works.
HSN stands for Harmonized System of Nomenclature (developed internationally by the World Customs Organization). SAC stands for Services Accounting Code (developed by the Central Board of Indirect Taxes and Customs in India).
In the Indian Customs and Central Excise Tariff classification system, Chapter 99 is legally reserved exclusively for Services. Because all service classifications sit inside Chapter 99, every SAC code in India begins with the two-digit prefix 99.
Under Notification No. 78/2020-Central Tax:
Turnover up to ₹5 Crore: Minimum 4 digits mandatory for B2B supplies (optional for B2C).
Turnover above ₹5 Crore: Minimum 6 digits mandatory for all B2B and B2C supplies.
Yes. If you are registered under GST as a freelancer, consultant, IT service provider, or agency, you must state the appropriate 6-digit SAC code (such as 998314 for IT consulting or 998311 for business consulting) on all your tax invoices. Failure to do so can prevent your corporate clients from claiming Input Tax Credit.
Yes! If a supplier delivers a composite or mixed supply involving both physical products and professional services (for example, supplying industrial air conditioning units under HSN 8415 and charging for installation/maintenance under SAC 9987), both the HSN codes and SAC codes should be itemized in separate rows with their respective GST rates.
Generate 100% Compliant GST Invoices with Free HSN & SAC
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