An HSN code, or Harmonised System of Nomenclature code, is an internationally standardised numeric code that classifies goods for taxation and trade. Under Indian GST, the HSN code on an invoice identifies the product and determines its tax rate; businesses must show four or six digits depending on turnover, and services use the parallel SAC code.
Why it matters for an Indian small business
The HSN code decides what GST rate applies to what you sell, so a wrong code means charging 12 percent on a 5 percent item, or vice versa, and the error surfaces in a notice months later with interest. Since April 2021, invoices must carry at least four HSN digits for turnover up to ₹5 crore (on B2B invoices) and six digits above that, and GSTR-1 includes an HSN summary that is checked against them. Marketplaces also require the code before a product can be listed.
For exporters, the same code appears on the shipping bill and decides duty drawback, so getting it right once pays off across compliance, customs and listings.
How it works
The system is hierarchical: 21 sections, 99 chapters (two digits), headings (four digits) and subheadings (six digits), with India adding two more digits for an eight-digit tariff line used in customs. Chapter 09 covers coffee, tea and spices; 0902 is tea; 090240 is black tea in packs over 3 kilograms. The GST rate schedule maps chapters and headings to rates of 0, 5, 12, 18 or 28 percent, with some items at special rates.
To find yours, search the GST rate finder on the portal or the CBIC tariff by product description, check how competitors and suppliers classify the same item, and ask your CA for anything ambiguous, since classification disputes are common. Services use the six-digit SAC starting with 99.
Example: an Agra leather goods maker
Taj Leather Works makes handbags, belts and wallets and sells to boutiques in Delhi and through its own website. Handbags fall under heading 4202, which also covers wallets, with GST at 18 percent when priced above ₹1,000 and 12 percent below that, while leather belts sit at 4203. The firm's turnover is ₹3.2 crore, so invoices carry four-digit codes. When a Mumbai boutique questions the rate on a ₹850 wallet, the exporter points to the sub-₹1,000 slab and the matching HSN on the invoice, and the dispute closes in one email. The website product pages carry the HSN too, which speeds up marketplace onboarding.
Common mistakes
- Copying an HSN from a supplier invoice without checking it fits your product.
- Showing two digits when four or six are required for your turnover.
- Using an HSN for a service instead of the SAC.
- Ignoring price-based rate splits, like apparel and footwear thresholds.
- Mixing a product and its packaging or accessory under one code.
How Neweb handles it
Neweb's GST invoice generator includes an HSN and SAC field with a searchable list, and Neweb's own invoices carry SAC 998315 for the hosting and website service so your accountant can file the input credit correctly.
HSN Code questions
How many HSN digits do I need on invoices?
Four digits if your aggregate turnover is up to ₹5 crore (optional on B2C invoices), six digits if above ₹5 crore, and eight digits for exports and imports.
What is the difference between HSN and SAC?
HSN classifies goods and is international; SAC (Services Accounting Code) classifies services under Indian GST and always begins with 99.
How do I find the HSN code for my product?
Use the HSN search on the GST portal, the CBIC tariff schedule or the rate finder, searching by product description. Confirm with your CA for borderline items.
Does the HSN code decide the GST rate?
Yes. The rate schedule assigns rates by HSN chapter or heading, sometimes with price or material conditions within a heading.
What happens if I use the wrong HSN code?
You may charge the wrong rate, face a notice for short payment with interest and penalty, and your buyer may be denied input credit. Correct it on future invoices and consult your CA about past periods.
Related terms.
Related pages.
GST invoice generator
Invoices with HSN and SAC fields and automatic tax split.
GST calculator
Apply the rate your HSN code sets to any amount.
Common GST invoice mistakes
HSN digit errors are among the most frequent.
Sell products online in India
Marketplace listing requirements including HSN.
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