Harmonised System of Nomenclature (HSN) codes classify goods, and Services Accounting Codes (SAC) classify services, both of which must appear on GST invoices in India. Using the wrong code or omitting it can lead to a defective invoice, a mismatch in GSTR-1 or a rejected input tax credit (ITC) claim by your buyer. The two systems differ in their structure, origin, digit count and application.
HSN code vs SAC code: A detailed comparison
The table below covers all meaningful differences between the two coding systems.
|
Aspect |
HSN code |
SAC code |
|
Full form |
Services Accounting Code |
|
|
Applies to |
Goods (products that can be physically handled and traded) |
Services (intangible activities provided for a fee) |
|
Governing body |
World Customs Organisation (WCO), adopted under GST in India by the CBIC |
Central Board of Indirect Taxes and Customs (CBIC), India |
|
Used on |
Tax invoices for goods, e-way bills and import/export documentation |
Tax invoices for services, GST returns |
|
International recognition |
Recognised in over 200 countries under the WCO framework |
India-specific; not part of the international WCO system |
|
Examples |
0901 (coffee), 6109 (T-shirts), 84713010 (laptops) |
998311 (management consulting), 996311 (hotel accommodation), 999311 (inpatient services) |
|
GST registration relevance |
Mandatory for goods suppliers registered under GST above the threshold turnovers |
Mandatory for service providers registered under GST |
When does each code apply?
The basic rule is that if you supply a product that can be touched, transported or inventoried, use an HSN code. If you supply an activity, skill or capability for a fee, use a SAC code. A few scenarios where the distinction matters in practice:
- A pharmaceutical company supplying medicines uses HSN codes (Chapter 30 under the WCO schedule).
- A software firm that provides SaaS subscriptions uses the SAC code 998314 (IT design and development services).
- A hotel's billing for a stay uses SAC code 996311; if it charges for a minibar item, that item is assigned an HSN code.
- A manufacturer who also installs machinery at the buyer’s site may need both codes on the same invoice, one for the goods and one for the installation service.
How do you verify your HSN or SAC codes?
Errors in HSN/SAC code identification are one of the most common causes of GSTR-1 mismatches and ITC disputes. To carry out reliable HSN code verification before filing or issuing an invoice, check the following:
- Confirm the code against the official HSN/SAC schedule published by the CBIC at cbic-gst.gov.in.
- Go to the services tab and click on Search HSN/SAC Code.
- Match the number of digits to your turnover bracket (4, 6 or 8 digits as applicable).
- Cross-check the applicable GST rate for the HSN code, since the rate is tied to the code. An incorrect code can result in charging the wrong tax rate.
Conclusion
The core difference is straightforward: HSN codes are for goods, SAC codes are for services and both carry compliance weight on every GST invoice you raise. The more consequential challenge is ensuring accurate HSN code identification for your specific product range. To ensure that you use the HSN code accurately, use advanced accounting software like TallyPrime. It supports HSN and SAC code validation at the stock item and ledger level, so your invoices carry the correct codes before they reach your buyer or the GST portal.
