Every line on a GST invoice needs a classification code: HSN if it is goods, SAC if it is a service. The code determines which rate applies, which makes it one of the more consequential fields on the document.
HSN in brief
HSN stands for Harmonized System of Nomenclature, a product classification system maintained internationally by the World Customs Organization and used by most trading nations. India adopted it for customs long before GST, and GST reuses it.
The structure is hierarchical and widens as it lengthens:
- 2 digits — chapter. The broadest grouping.
- 4 digits — heading. A category inside the chapter.
- 6 digits — subheading. Internationally standardised to this level.
- 8 digits — tariff item. India's national extension for finer distinctions.
Because the first six digits are internationally common, an HSN code means broadly the same thing in India as elsewhere, which matters for import and export documentation.
SAC in brief
SAC stands for Services Accounting Code. It is India's own classification for services under GST and is six digits throughout.
By convention SAC codes begin with 99, which is a quick way to tell a SAC from an HSN when you see a bare number on an invoice. After that the digits narrow from a broad service category to a specific service.
How they differ
- What they cover. HSN is goods, SAC is services.
- Origin. HSN is international; SAC is Indian.
- Length. HSN runs from 2 to 8 digits; SAC is 6.
- Recognisability. SAC codes start with 99.
How many digits do you have to show?
The number of HSN digits required on an invoice depends on the supplier's turnover, with larger businesses required to report at a finer level. The requirement has been tightened over time, so check the current rule rather than assuming the one you learned in 2018 still applies.
Two practical notes: reporting more digits than required is generally acceptable; reporting fewer than required is not.
Why the code matters
It sets the rate. The rate schedules are organised by classification. Pick a different code and you may apply a different rate.
It affects your credit. If a supplier misclassifies, the tax on the invoice may be wrong, which creates problems for both sides.
It appears in returns. Classification-level summaries feed GST returns, so inconsistent coding across similar items creates reconciliation work.
Mixed and composite supplies
Real transactions are rarely tidy. Supplying a machine with installation is goods plus a service. The GST framework has rules for composite supplies, where one element is principal and the whole supply follows it, and mixed supplies, where the highest rate applies. Which one you have depends on the facts, and it decides whether you cite an HSN or a SAC.
Getting classification right
- Classify what you actually supply, not the nearest familiar code.
- Read the chapter and section notes, not just the description line — they contain inclusions and exclusions that change the answer.
- Be consistent: the same product should carry the same code on every invoice.
- Where a product genuinely could sit in two places, document the reasoning you used.
- For material amounts, take professional advice. Classification disputes are among the most common in indirect tax.
Where to go next
- Read what is an HSN code.
- Read what is a SAC code.
- Read how to find the right HSN code.
- Search codes with HSN code search and SAC code search.
Rates and classification rules change. Confirm against CBIC before relying on a code for filing.