What is HSN?
HSN is a short form for "Harmonised System of Nomenclature". A coding system created by the World Customs Organisation (WCO) to standardize the classification of goods worldwide. HSN has a 2, 4, 6 digit universal coding system covering 5000+ goods, widely used in the export and import business around the world.
HSN Code is nothing but a 2, 4, 6, 8 digit code from HSN system related to a product.
Key Components of GSTR 4 Return
- HSN Classification
- How different are the Indian HSN codes from the worldwide HSN codes ?
- HSN Codes in GST
- What is SAC?
- How to find GST rates with HSN or SAC codes?
- What are Goods GST slab rates in India?
- What are Services GST slab rates in India?
- What are the consequences in using a wrong HSN / SAC code?
1. HSN Classification
HSN codes are broadly classified into 21 sections underwhich close to 5000 codes were defined to identify a type of product to trade. Below are the Section Number and the Description.
| Section | Description |
| 1 | Live animals; Animal products |
| 2 | Vegetable products |
| 3 | Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable waxes |
| 4 | Prepared foodstuffs; beverages, spirits and vinegar; tobacco and manufactured tobacco substitutes |
| 5 | Mineral products |
| 6 | Products of the chemical or allied industries |
| 7 | Plastics and articles thereof; rubber and articles thereof |
| 8 | Raw hides and skins, leather, furskins and articles thereof; saddlery and harness; travel goods, handbags and similar containers; articles of animal gut (other than silk-worm gut) |
| 9 | Wood and articles of wood; wood charcoal; cork and articles of cork; manufactures of straw, of esparto or of other plaiting materials; basketware and wickerwork |
| 10 | Pulp of wood or of other fibrous cellulosic material; recovered (waste and scrap) paper or paperboard; paper and paperboard and articles thereof |
| 11 | Textiles and textile articles |
| 12 | Footwear, headgear, umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips, riding-crops and parts thereof; prepared feathers and articles made therewith; artificial flowers; articles of human hair |
| 13 | Articles of stone, plaster, cement, asbestos, mica or similar materials; ceramic products; glass and glassware |
| 14 | Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal and articles thereof; imitation jewellery; coin |
| 15 | Base metals and articles of base metal |
| 16 | Machinery and mechanical appliances; electrical equipment; parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles |
| 17 | Vehicles, aircraft, vessels and associated transport equipment |
| 18 | Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; clocks and watches; musical instruments; parts and accessories thereof |
| 19 | Arms and ammunition; parts and accessories thereof |
| 20 | Miscellaneous manufactured articles |
| 21 | Works of art, collectors pieces and antiques |
2. How different are the Indian HSN codes from the worldwide HSN codes ?
Broadly, HSN Codes defined by World Customs Organisation (WCO) are being followed around the world, including India. The only difference would be the last 2 digits in the 8-digit code (7th and 8th digits) are some what represents the localisation requirement for India. WCO revise the HSN codes every 5 years.
3. HSN Codes in GST
From 1st Apr 2021, Central Board of Indirect Taxes and Customs, Government of India (CBIC) notified most business to follow a minimum of 4 digit HSN Code while issuing a Tax Invoice via Notification No. 78/2020 – Central Tax, dated 15th October, 2020
| Turnover | Tax Invoice Type | Min. no. of HSN digits | Mandatory? |
| Up to 5 Crores | B2B | 4 | Yes |
| Up to 5 Crores | B2C | 4 | Yes |
| above 5 Crores | B2C, B2B | 6 | Yes |
Note: The e-invoices of taxpayers with an AATO of Rs. 5 Crores are required to include a minimum of a six-digit HSN code as of December 15, 2023.
4. What is SAC?
SAC stands for "Services Accounting Code" used in GST to classify the services to measure the trade and to use in taxation, very similar to HSN codes. An example, SAC Code 9982 represents "Legal and accounting services"
SAC code is nothing but a 2, 4, 6, 8 digit code related to a service.
5. How to find GST rates with HSN or SAC codes?
Search above GST Rate Search using a keyword from your product description to find the HSN code and the related GST rates consists of three percentages, CGST, SGST, IGST.
If you are using EZTax.in Books GST Accounting software or portal, you can select the HSN / SAC code directly in the Product Master. Refer Help Center @ Product Master Help
6. What are Goods GST slab rates in India?
Central Board of Indirect Taxes and Customs (CBIC) has categorised all the products under seven (7) GST slab rates and they are Nil Rated, 0.25%, 3%, 5%, 12%, 18%, 28%.
7. What are Services GST slab rates in India?
Central Board of Indirect Taxes and Customs (CBIC) has categorised all the services under five (5) GST slab rates and they are Nil Rated, 5%, 12%, 18%, 28%.
8. What are the consequences in using a wrong HSN / SAC code?
Accurate identification of a HSN or SAC code is crucial in finding the correct GST rate for a product or service. Selling a product or a service with incorrect GST rate would attract scrutiny, penalty, and interest.
Let's consider, two products that has similarities (contains the word 'Milk') yet the tax treatment would differ.
| HSN Code | Description | GST Rate | What's Common? |
| 0403 | Curd, Lassi, Butter milk, pre-packaged and labelled | 5% | 'Milk' |
| 0405 | Butter and other fats (i.e. ghee, butter oil, etc.) and oils derived from milk; dairy spreads | 12% | 'Milk' |