Every GST invoice needs a code that tells the tax system what you sold. HSN (Harmonised System of Nomenclature) classifies goods; SAC (Services Accounting Code) classifies services. Get the code right and the rate follows; get it wrong and you under- or over-pay, and your buyer's ITC is questioned.
How many digits
| Aggregate turnover (previous FY) | B2B invoices | B2C invoices |
|---|---|---|
| Up to ₹5 crore | 4 digits mandatory | Optional |
| Above ₹5 crore | 6 digits mandatory | 6 digits |
| Exports / imports | 8 digits | — |
GSTR-1 Table 12 must match — 4 digits for ≤ ₹5 crore, 6 digits above. The portal now validates HSN entries against its master and rejects invalid codes.
Reading an HSN code
Take 1006 30 10 (basmati rice):
- 10 — chapter (cereals)
- 1006 — heading (rice)
- 1006 30 — sub-heading (semi-milled or wholly milled rice)
- 1006 30 10 — tariff item (basmati)
SAC codes are 6 digits starting with 99: 9983 14 = IT design and development services; 9963 11 = room accommodation.
After GST 2.0
The rate rationalisation in September 2025 changed the rates attached to codes, not the codes themselves. Your HSN for shampoo (3305) is unchanged; its rate went from 18% to 5%. Re-map rates in your software; don't re-map codes. The HSN finder shows both the code and the current rate.
Common codes for small business
| Item | Code | Rate |
|---|---|---|
| Restaurant service | 9963 | 5% |
| Salon / beauty | 9997 | 5% |
| Consulting / IT services | 9983 | 18% |
| Accounting / legal | 9982 | 18% |
| Courier | 9965 | 18% |
| Garments ≤ ₹2,500 | 61/62xx | 5% |
| Mobile phones | 8517 | 18% |
| Laptops | 8471 | 18% |
| Cement | 2523 | 18% |
| Rice (branded, packed) | 1006 | 5% |
| Medicines | 3004 | 5% |
| Furniture | 9403 | 18% |
Where to look codes up
- The HSN/SAC finder — search by product name.
- The GST portal's "Search HSN" tool (Services → User Services).
- The CBIC tariff for edge cases and 8-digit export codes.
- Your supplier's invoice — for resold goods, use the same HSN.
Composite and mixed supplies
- Composite supply (naturally bundled, one principal item — e.g. a laptop with a charger): use the principal item's HSN and rate.
- Mixed supply (a gift hamper of unrelated items sold for one price): the highest rate among the items applies.
Penalties for wrong codes
- General penalty up to ₹25,000 per return for incorrect or missing HSN (Section 125).
- If the wrong code led to short payment, the tax difference plus interest and penalty under Section 73/74.
- Buyers may reject invoices in IMS if the code makes the rate look wrong.
Honest classification disputes (is a "paratha" bread at 0% or a "ready-to-eat" item at 5%?) go to Advance Ruling; for everyday items, follow the supplier's classification and the CBIC circulars.
FAQ
Do I need HSN codes on B2C bills?
Not if turnover is ≤ ₹5 crore. Above that, 6 digits are mandatory on all invoices.
Can I use 8 digits even if 4 are required?
Yes. More digits are always acceptable; fewer are not.
Is HSN the same worldwide?
The first 6 digits are international (WCO). India adds 2 more for tariff items.
What HSN do I use for a service + goods package like AMC with parts?
It's usually a composite supply of service; use the service SAC (e.g. 9987 for repair) with the parts listed under it.