What is hsn and sac under gst?
HSN stands for Harmonized System of Nomenclature and is used to classify goods in a systematic manner. It was developed by the World Customs Organization (WCO) and is considered the global standard when it comes to naming goods. This 6-digit uniform code can be used to classify more than 5,000 products and is also used for classification for tax purposes.
Since 1971, India has been a member of WCO and was using 6-digit HSN codes to classify goods for Customs and Central Excise since 1986. However, the Customs and Central Excise added 2 more digits later to make HSN codes for better differentiation.
With the introduction of GST in India, HSN is now being used under a 3-tiered system.
This includes the following:
Within the context of GST, HSN codes are used in order to make GST something that is used worldwide. HSN codes, in general, contain 21 sections, within which you can find 99 chapters along with 1,244 headings, and 5,224 subheadings.
Each section number that is used is further divided into chapters, which are then divided into headings and then, subheadings. The sections and chapters describe the product while the headings and subheadings offer much greater detail about the product itself.
For clarity, let’s look at this HSN-62.13.90
In this case, the first two digits (62) are used to describe apparel or clothing (but not knitted or crocheted clothing). The next two digits (13) refer to handkerchiefs. Finally, (90) refers to the fact that these handkerchiefs are made of other textiles or materials. So, this code is referring to handkerchiefs that are made from textile materials.
In India, there are two additional steps. If the handkerchiefs were made of man-made textiles, then the total code would be 62.13.90.10 wherein the 10 refers to the man-made textiles. Similarly, if the products were made of silk or silk waste, then the code would be 62.13.90.90, wherein the 90 refers to the silk or silk waste.
SAC stands for Servicing Accounting Code and is used to classify services instead of goods. All services tend to begin with the number 99, which is what identifies the code as a SAC and not an HSN.
For clarity, let’s look at this SAC- 99.82.13. Here, the 99 represents all services in general. 82 classifies this as legal services and 13 classifies it as legal documentation for patents.
One of the easiest ways to avoid mistakes with your HSN information while filing GST is by using smart payment dashboards and functions that are offered by Razorpay.
One of the many benefits of using Razorpay is that you can generate GST-compliant invoices automatically with every transaction (or with a few transactions together) if you need to. You can even save templates of your invoice or line items so that you don’t have to enter them, again and again, each time you need an invoice created!
Also Read: How to generate GST compliant dynamic QR codes with Razorpay
These invoices are easy to share and download. Ensure your business is compliant with all tax regulations by working on an automated platform that does everything for you!
Be sure to also check what tax rate you’re subject to for your goods and services. Get GST inclusive and exclusive prices for your goods with our free GST calculator.
In this article, we will cover what these codes are, where you can find them under GST, and how you can use HSN in India.
HSN (Harmonized System of Nomenclature) has been introduced for an orderly classification of goods worldwide. This code is a uniform 6-digit code that helps to classify more than 5000 products. It came into effect in 1988 and was developed by the WCO(World Customs Organization).
The HSN system is recognized internationally for codifying and classifying all the products worldwide. In addition, the WTO(World Trade Organization) and individuals use the HSN system to trade and trade negotiation.
21 sections of HSN code
Service Accounting Code, also known as SAC, is the code issued by the Central Board of Indirect Tax & Customs (Service Tax Department) to classify and identify the services offered. Each Service provided has a unique SAC code precisely like a unique HSN for different categories of products.
People involved in providing services can and should use the SAC code to understand the tax imposed on the services offered and received clearly.
SAC (Services and Accounting Code) codes are based on the Harmonized System of Nomenclature, an internationally recognized system for classifying and codifying all the products in the world. This system enables the compliance of GST based on international standards.
Under GST, HSN and SA codes shall have 3 different categories.
Dealers under Composition Scheme who are exempted are not required to quote HSN.
The above categories were amended vide Notification No. 78/2020- Central Tax, dated 15th October 2020 to mandate 4/6 HSN / SAC Code digits on supply of goods or services on the Tax Invoices w.e.f. 1st April 2021.
Further, there was an addition in the above categories & was again amended vide Notification No. 90/2020- Central Tax, dated 1st December 2020, to provide for a class of chemicals supply. Therefore, the 49 chemicals are specified in the enclosed Annexure have to show under eight digits compulsorily.
Above, we have seen the basic concept of HSN. Now let us look at its structure.
The HSN code contains:
For Indian manufacturers, it is required to follow the three tired HSN structures.There are about 21 groups in the HSN structure, and further, these groups are categorized into 99 chapters. Then these chapters are divided into headings with 1244 in number. These headings are then subsequently divided into 5224 subheadings.
The HSN Codes plays out in the below manner:
Example of an HSN code - schematic
Breaking up the 6 digit SAC in GST
For example, the SAC for Information technology (IT) design and development services is 998314.
The taxpayers shall mention all the following instances, HSN for goods and SAC for services.
1. GST RegistrationEvery business under GST will need to declare the goods and services type that they are dealing with. Thus, it is essential to mention the correct HSN/SAC code at the time of registration.
2. GST RateFor goods and services, if the taxpayer is aware of HSN/SAC code, he can easily determine the GST applicable rate.
3. GST InvoiceWhen a seller issues an invoice for goods and services, he needs to mention the HSN/SAC code in the invoice, which is based on the total turnover of his business.
4. GST ReturnsWhen the taxpayer files the GST Return, he needs to report the HSN Summary. The summary consists of the details of goods and services sold, classified based on HSN/SAC reported.
The main difference between HSN and SAC codes is that HSN codes are meant only specifically for goods and services, and SAC codes specify for services only. Other, difference is in the number of digits in their code and their relevance. Example - HSN Code is an 8-digit code, and SAC code is a 6-digit code.Click here to view the entire list for HSN and SAC codes
Under GST, all products and services have an associated HSN and SAC code for allocating the correct GST rate. Deskera Books has all these HSN and SAC codes inbuilt for goods and services, and will automatically apply the tax rates and cess, so you don't have to refer to an excel sheet every time.
Refer the below article to know how HSN and SAC codes work in Deskera Books.
HSN – Stands for Harmonised System Nomenclature. It was developed by World Customs Organization. It was developed with an objective to classify goods from all over the World in a systematic and an organised manner.
HSN is a 6 digit structure, comprising of more than 5000 commodity groups. It is arranged in a legal and logical structure and is supported by well-defined rules to achieve uniform classification.
The HSN system is used by more than 200 Countries and economies as a basis for their customs tariffs and for the collection of international trade statistics.However, the HSN code can be altered as required by each country using it to fit to their system of identification and taxation.
HSN code has been in use in India since 1986 in the Central Excise and Customs regime. Going forward this was used to calculate Value Added Tax and currently the Goods and Service Tax,which has subsumed many indirect taxes from the erstwhile VAT regime in India.
India follows a 8-digit HSN code structure. It is much mode detailed system of classification than the standard 6-digit structure defined by WCO. Overall there are 21 sections comprising 99 chapters divided into 1244 headings and 5224 sub-headings.
Eg. 284310 – 28 is the chapter, 43 is the heading, 10 is the product code. It is for Colloidal Precious Metals
Likewise, each product has a very detailed classification in the HSN code system.
Indian manufacturers under GST shall be required to follow a 3-tiered structure of HSN.
SAC – stands for Services Accounting Codes. Like the HSN code is for goods under the GST regime in India, SAC is used to classify services under the GST regime. It is a standard set of codes issued by the CBEC.
Harmonized System of Nomenclature (HSN) – Under the India GST regime, a Harmonized System of Nomenclature (HSN) code is used to classify different goods in a transaction under GST. In addition, a HSN code determines the tax rates to apply to goods.
Services Accounting Codes (SAC) – Services Accounting Code (SAC) is based on the Harmonized System of Nomenclature (HSN), which is internationally recognized system for classifying and codifying all products. A SAC code is used to classify different services under GST. In addition, a HSN code determines the tax rates to apply to services.
By default, the India Localization Tax Engine SuiteApp includes some SAC codes for GST. You (Administrator) can create new HSN or SAC codes as required. Only Administrators can create, edit, inactivate, or delete India HSN and SAC codes.
- Go to the GST portal homepage. Visit the GST Portal Homepage and login with valid credentials.
- In the case of HSN Codes.
- Select the tax-type.
- Search HSN Chapter by Name or Code.
- Search HSN Code.
- Select the appropriate dates.
- Click on the “Search” option.
- Select the State.
Harmonized System of Nomenclature (HSN) and Services Accounting Codes (SAC) codes are used to classify different goods and services. In NetSuite, the HSN and SAC codes determine the applicable GST to a line item in a transaction.
