If your aggregate annual turnover in the previous financial year was up to ₹5 crore, your B2B invoices need at least a 4-digit HSN or SAC code. B2C invoices are optional for you. Above ₹5 crore, every invoice needs at least 6 digits, B2B and B2C alike.
That's the short answer. Below you'll find how to pick the right code, where to look it up, a reference table of common codes, and why a wrong code shows up later as a headache in your GSTR-1.
HSN vs SAC: which one do you use?#
Both are classification codes. Which one you use depends on what you're selling.
- HSN (Harmonised System of Nomenclature) is for goods. Think steel brackets, cotton kurtas, spices, LED lights. It's an international system that India extends to 8 digits.
- SAC (Services Accounting Code) is for services. Think software development, consulting, graphic design, construction. SAC codes in India start with 99.
One way to remember it: if you can drop it on your foot, it's HSN. If it's work, advice or a right to use something, it's usually SAC.
Some businesses need both. A Pune signage company that makes boards (goods) and also installs them on a separate contract (service) may have HSN lines and SAC lines on its invoices. Each line carries its own code.
How many digits: the turnover rule#
The digit requirement depends on your aggregate annual turnover (AATO) of the previous financial year. It doesn't depend on the size of a single invoice.
| Previous year's AATO | B2B invoices (to GST-registered buyers) | B2C invoices (to consumers) |
|---|---|---|
| Up to ₹5 crore | Minimum 4 digits, mandatory | Optional (4 digits if you show it) |
| Above ₹5 crore | Minimum 6 digits, mandatory | Minimum 6 digits, mandatory |
A few practical points:
- "Minimum" means you can show more. If your item has a clear 8-digit HSN, showing all 8 is fine and often cleaner.
- Turnover is PAN-level. AATO counts all GSTINs under the same PAN across states. A trader with ₹3 crore in Delhi and ₹2.5 crore in Haryana is above ₹5 crore.
- Check it every April. If you crossed ₹5 crore last year, update your codes to 6 digits from the new financial year.
- Exporters: for export invoices, people commonly use 8-digit HSN for goods, because customs and shipping documents work at that level. Confirm with your CA or customs broker.
Take a freelance UI designer in Bengaluru billing ₹40 lakh a year to companies. She needs at least 4 digits on every invoice, so 9983. Showing 998391 is better. Take a Ludhiana hosiery maker with ₹8 crore turnover, selling both to retailers and on its own website. He needs at least 6 digits on every invoice, including website orders to consumers.
How to find the right code for your product or service#
Don't copy a code from a competitor's invoice or a random website. Use these steps.
- Describe what you sell in plain words. For example, "cotton T-shirts, knitted, for men" or "custom software development for clients".
- Search on the GST portal. On gst.gov.in, use the HSN/SAC search (under the Services menu, in user services). You can search by keyword or by code. It shows the description against each code.
- Go from broad to narrow. Start at the chapter (2 digits), then the heading (4 digits), then the sub-heading (6 digits). Read the descriptions at each level. Check that the code really matches your product. A similar-sounding word isn't enough.
- Cross-check the rate. The tax rate is linked to the code through the GST rate notifications. If the code you picked gives a rate very different from what your industry charges, stop and check.
- Ask your CA for borderline items. Composite products, kits, parts versus finished goods, and services bundled with goods are where mistakes happen. If the stakes are high, an advance ruling is an option.
Tip for services: the description matters more than your job title. A "digital marketing agency" might be selling advertising services, IT design services or market research, depending on the actual work. Code each service line by what it really is.
Common SAC codes and HSN chapters (quick reference)#
Use this as a starting point. Always confirm the full code and current rate on the GST portal before saving it.
Common SAC codes for services
| Service | SAC code | Typical users |
|---|---|---|
| IT consulting and support | 998313 | IT consultants, support firms |
| IT design and development (software, apps, websites) | 998314 | Software agencies, freelance developers |
| Hosting and IT infrastructure | 998315 | Hosting providers, managed cloud services |
| Licensing of software | 997331 | SaaS/software licence sellers |
| Management consulting | 998311 | Business and strategy consultants |
| Accounting and bookkeeping | 99822 (group) | Accountants, bookkeeping firms |
| Advertising services | 99836 (group) | Ad agencies, media buyers |
| Specialty design (graphic, interior, industrial, fashion) | 998391 | Designers, branding studios |
| Photography and videography | 99838 (group) | Studios, event shooters |
| Construction and works contracts | 9954 (heading) | Contractors, interior fit-out firms |
For works contracts, the rate depends on the type of project and the client (government, residential, commercial and so on). Treat 9954 as the starting heading and work out the exact entry with your CA.
Common HSN chapters for goods
| Goods | HSN chapter (first 2 digits) |
|---|---|
| Spices, tea, coffee | 09 |
| Pharmaceutical products | 30 |
| Cosmetics and toiletries | 33 |
| Plastics and plastic articles | 39 |
| Paper and paperboard articles | 48 |
| Knitted apparel | 61 |
| Non-knitted apparel | 62 |
| Articles of iron or steel | 73 |
| Machinery and mechanical parts | 84 |
| Electrical equipment and electronics | 85 |
| Vehicle parts | 87 |
| Furniture, lighting | 94 |
A chapter alone is never enough for an invoice. You still need at least 4 or 6 digits, depending on your turnover.
How wrong codes cause trouble in GSTR-1 (Table 12)#
Table 12 of GSTR-1 is the HSN-wise summary of your outward supplies. For each code it shows quantity, unit, taxable value and tax. It must agree with the invoices you report in the rest of the return.
Here's where it usually breaks:
- Same item, different codes. One invoice says 6109, another says 610910, a third has no code at all. Table 12 splits these into separate rows, and your CA has to clean them up.
- Wrong digit count. Under the current portal process, HSN codes in Table 12 are picked from a dropdown, and the required digit count follows your turnover. A code that doesn't fit gets flagged.
- Rate mismatch. If the code says 12% but you charged 18%, the summary shows a combination that doesn't make sense.
- B2B and B2C mixed up. Table 12 is now reported separately for B2B and B2C supplies, so each invoice has to be tagged correctly.
- Units missing. For goods, the unit of quantity (UQC) such as NOS, KGS or MTR has to match the item.
Wrong or missing HSN details can also draw notices and a general penalty under the GST law. It's easier to get the code right once than to explain it later.
Save the code once, use it everywhere#
Most HSN problems come from typing the code by hand on every invoice. The fix is simple. Keep a master list of your items and services, and attach each one's code, rate and unit to it once.
- Make an item or service master. Every product and service you sell gets one entry with its HSN/SAC, GST rate and unit.
- Have your CA review it once. Ten minutes of checking at the start saves hours at return time.
- Never type codes on the invoice. Pick the item, and let the code and rate fill in.
- Review the list every April. Do it for your turnover check, and also after any GST rate changes.
If you use Clyrix, you can save the HSN/SAC on each item or service. It then shows up on every GST-ready invoice, with CGST/SGST/IGST shown separately, and in the GSTR-1 export your CA works from. See GST features and invoicing.
Once your codes are right in one place, every invoice and every GSTR-1 uses the same ones.
