HSN/SAC Codes and GST Rates finder

What is HSN code?

HSN code stands for Harmonized System of Nomenclature. It is a standardized system for classifying goods used globally, including in India. Introduced by the World Customs Organization (WCO) in 1988, HSN codes (also known as HS codes) are six-digit identification codes used to categorize goods in international trade. This system is now utilized by over 200 countries, including India, to classify more than 5,000 commodity groups for international shipping.

How does HSN code works?

The HSN system organizes goods into around 5,000 groups, each identified by a unique six-digit code. These codes provide goods and commodities with a unique classification ID, helping customs authorities determine what is being shipped, and apply the appropriate fees and taxes in the importing country. This globally recognized coding system enhances the speed and efficiency of exporting and importing goods worldwide.

Why is HSN code important?

The primary purpose of the HSN system is to classify goods systematically and logically across the world, including in India. The accurate HSN code is essential for the legal and commercial documentation provided by exporters and importers.

These codes appear on trade documents such as bills of lading and letters of credit, and they also help in determining customs duties for goods.

HSN Worldwide

The HSN system is used by more than 200 countries and economies, including India, for the following reasons:

• Ensures uniform classification of goods
• Serves as a base for Customs tariffs
• Helps in collecting international trade statistics

Over 98% of goods in international trade are classified using the HSN. While the basic HSN number remains the same globally, some countries, including India, may add a few digits for more specific classifications based on the nature of the goods.

HSN in India

India has been a part of the World Customs Organization (WCO) since 1971. Initially, India used 6-digit HSN codes for Customs and Central Excise purposes. To make the classification more precise, India added two more digits, resulting in an 8-digit HSN code system.

Understanding the HSN Code Structure in India

Understanding HSN codes can seem complex at first, but it can be broken down into a simple structure. The HSN code structure consists of:

• Sections: Product groups, with 21 sections listed by the WCO (although sections do not form part of the HSN code)
• Chapters: Categories of products under sections, with a total of 99 chapters
• Headings: Subcategories of products under chapters, with 1,244 headings
• Subheadings: Specific products listed under headings, with 5,224 subheadings

The six-digit HSN code is divided as follows:

1. First two digits: Represent the chapter
2. Middle two digits: Represent the heading
3. Final two digits: Represent the subheading

For example, the HSN code for brown rice would be 100620, which corresponds to:

• Section II: Vegetable Products
• Chapter 10: Cereals
• Heading 06: Rice
• Sub-heading 20: Husked (brown) rice

Are HSN Codes the Same in Every Country?

While HSN codes aim for global uniformity, they are not identical in every country. The initial six digits are consistent worldwide, but many countries, like India, add their digits to create longer, country-specific HSN codes for more precise classifications. For instance:

• India: 8-digit HSN code for tax purposes
• United States: 10-digit Harmonized Tariff Schedule (HTS) code
• China: A 13-digit code used for customs procedures and detailed product classification.
• Australia: 8-digit Customs Tariff or Working Tariff code
• United Kingdom: 10-digit UK Global Tariff (UKGT)
• European Union: 10-digit10-digit TARIC code (the Integrated Tariff of the European Union).

HSN rule to follow for GST in India

From April 1, 2021, businesses in India need to follow these rules for declaring HSN codes on their invoices:

• If your annual turnover is up to ₹5 crore: You must include at least 4 digits of the HSN code on your invoices.
• If your annual turnover is more than ₹5 crore: You must include at least 6 digits of the HSN code on your invoices.
• For a specific product like Chemicals and on all export and import transactions must use 8 digits.

These rules are mandatory and help standardize the classification of goods and services for GST purposes. Essentially, the higher your turnover, the more detailed the HSN code you need to provide.

Declaration of HSN code

When you are reporting invoices for the financial year 2021-22, you need to look at your turnover from the previous financial year, which is 2020-21. This means the turnover you had in 2020-21 will determine how many digits of the HSN code you need to declare in 2021-22.

For any export or import transactions, you must declare all 8 digits of the HSN code. This is mandatory regardless of your turnover.

So, in summary, the number of HSN code digits you need to declare on your invoices depends on your turnover from the previous financial year, and for exports and imports, you always need to use the full 8-digit HSN code.

Why is HSN Important Under GST in India?

HSN codes play a crucial role in the Indian GST system by making the process more systematic and globally accepted. They eliminate the need to manually enter detailed descriptions of goods, simplifying GST returns.

Key Considerations with HSN Codes

Correct application of HSN codes is crucial for customs tariffs and taxation. Exporters must apply the correct code for each product to avoid complications like:

• Shipping delays
• Overpaying or underpaying on customs fees
• Fines
• Seized goods

Keeping an up-to-date record of the correct HSN codes is essential for minimizing errors in shipping documentation. The WCO reviews the HSN code system every few years, so staying informed about updates is vital.

Services Accounting Code (SAC) in GST

In India, services are also classified using Services Accounting Code (SAC), a system similar to HSN but used for services. These codes help in the recognition, measurement, and taxation of services under GST. For example:

Legal documentation and certification services for patents, copyrights, etc.: 998213

• 99: Common code for all services
• 82: Major category, in this case, legal services
• 13: Detailed nature of the service, in this case, legal documentation for patents, etc.

UQC in GST

UQC stands for Unique Quantity Code, representing a unit of measurement (like 1 kilogram of wheat or 1 liter of oil) in India. As per CGST Rules, any tax invoice, credit note, or debit note must include a UQC or quantity unit description.

You can find the latest HSN/SAC code and GST rates for all the good and services using our HSN code and GST rates finder tool.

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