(The author is a Practicing Chartered Accountant and a renowned Trainer with an exposure in Direct and Indirect Taxes. She has delivered several presentations at ICAI, ICSI and other professional forums on topics pertaining to GST. Author can be reached at firstname.lastname@example.org or 8109825451)
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In GST regime each invoice will have to mention HSN code for each item sold or SAC code of each service provided. It becomes imperative for us to understand how new concept of HSN and SAC codes in GST will affect you and your business.
What is HSN Code-
HSN code means harmonized system of nomenclature code where each good is given a particular code. It is the codification of all the trading goods into various sections with each chapter containing commodity of similar nature. HSN has 21 sections, 99 chapter, 1244 headings, and 5224 subheadings.
What is SAC code-
In case of services, for each type of service provided is given an unified code for recognition, measurement and taxation. These are known as SAC codes. In the current service tax regime, SAC codes are already defined for each type of service.
HSN / SAC under GST-
Under GST, the majority of dealers will need to adopt two-, four-, or eight-digit HSN codes for their commodities, depending on their turnover the previous year:
||Requirement of HSN
|with turnover of less than Rs 1.5 crores
||not be required to use HSN codes
|between Rs 1.5 crores and Rs 5 crores
||two-digit HSN codes
|with turnover equal to Rs 5 crores and above
||four-digit HSN codes
||eight digits HSN codes
- HSN will be mentioned in Invoice and mentioned in the GST tax return details, which will be uploaded on the GST portal.
- At the time of registration/migration, the business taxpayer will be required to mention HSN code of the goods he deals with during registration.
- Services will be classified as per the Services Accounting Code (SAC). There are Service accounting codes issued by government for Service tax. This is expected to remain the same in GST regime as well.
- Section I (Chapters 1 to 5) covers live animals and animal products
- Section II (Chapters 6 to 14) covers vegetable products
- Section III (Chapter 15) covers animal or vegetable fats and oils
- Section IV (Chapters 16 to 24) covers beverages, spirits, vinegar, and tobacco
- Section V (Chapters 25 to 27) covers mineral products
- Section VI (Chapters 28 to 38) covers chemical and para-chemical products
Section VII (Chapters 39 to 40) covers plastics and rubber, and articles thereof
- Section VIII (Chapters 41 to 43) covers certain animal hides and skins
- Section IX (Chapters 44 to 46) covers wood, cork, manufactures of straw, and articles thereof
- Section X (Chapters 47 to 49) covers pulp of wood, paper, paperboard, and printed products
- Section XI (Chapters 50 to 63) covers textiles and textile articles
- Section XII (Chapters 64 to 67) covers footwear, headgear, umbrellas, walking sticks, prepared feathers, artificial flowers, and articles of human hair
- Section XIII (Chapters 68 to 70) covers articles made of minerals, stone, plaster, cement, etc., and ceramic and glass products
- Section XIV (Chapter 71) covers precious metals and stones
- Section XV (Chapters 72 to 83) covers base metals and articles thereof (Note: Chapter 77 is reserve for future use)
- Section XVI (Chapters 84 to 85) covers machinery and mechanical appliances, electrical equipment, sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles
- Section XVII (Chapters 86 to 89) covers vehicles, aircraft, vessels, and associated transport equipment
- Section XVIII (Chapters 90 to 92) covers optical, photographic, cinematographic, and musical apparatus and equipment; measuring, medical, surgical, and other instruments; and clocks and watches
- Section XIX (Chapter 93) covers arms and ammunitions
- Section XX (Chapters 94 to 96) covers miscellaneous manufactured articles
- Section XXI (Chapters 97 to 99) covers arts, collector’s pieces, and antiques (Note: Chapter 99 is reserved for national use)