HSN/SAC Code List & GST Rate Finder

What is HSN Code?

HSN stands for Harmonized System of Nomenclature. HSN was raised and industrialized by the WCO (World Customs Organization) in the year 1988. Since then 5 revisions has already been implemented worldwide. HSN code asserts more than 5000 goods meticulously and is widely used by more than 150 countries. It is a globally accepted multipurpose tool for customs and trade procedure. Currently, more than 95% of trade is under the WCO and every country is following 2017 revised HSN codes including India.

HSN Codes for GST in India:

HSN will be applicable in India after implementation of GST. India has already been using HSN system in the Central Excise and Customs regime.

It is a much more detailed classNameification that added another two digits to the 6-digit structure. There is a requirement to mention HSN code of items in tax invoice under GST.

Provisions related to HSN under GST are given below:-

  Now the Govt. has given some relief to small taxpayer with annual turnover up to Rs 1.50 crore in preceding financial year need not be required to mention HSN code in their tax invoice.

  Taxpayers having turnover exceeds Rs. 1.5 crore but up to 5.00 crore will be required to mention only two digits of HSN code.

  Taxpayers having turnover exceeds Rs 5.00 crore will be required to mention four digits of HSN code.

How do HSN work?

HSN is a six-digit code that classNameifies more than 5000 products, arranged in a legal and logical structure. To achieve uniform classNameification, the HSN is supported by well-defined rules and is accepted worldwide

HSN classNameification is widely used for taxation purposes by helping to identify the rate of tax applicable to a specific product in a country that is under review. It can also be used in calculations that involve claiming benefits. Yet that's not all- it also applies to import and exports. The HSN code aids in determining the quantity of all items imported or traded through a nation.

The Importance of the HSN Code

While the primary purpose of the HSN code is the systematic classNameification of goods, it can also be used to gather data and solve problems that would otherwise be difficult to obtain. The result is a more efficient international trade system. HSN is in use worldwide, with 200+ countries participating. This impressive adoption rate can be chalked up to the benefits of HSN, which include:

  Collection of international trade statistics

  Provision of a rational basis for Customs tariffs

  Uniform classNameification

Nearly 98% of international trade stock is classNameified in terms of HSN, further evidence of its reputation as the best form of international classNameification.

HSN numbers exist for each commodity in every country, and the number remains the same for almost all goods. In some countries, HSN numbers can vary a little because they are entirely based on the nature of the items classNameified.

CASE STUDY

India has been a member of the WCO (World Customs Organization) since 1971. It initially employed six-digit HSN codes to classNameify merchandise for Customs as well as Central Excise duties. To make the codes more precise, the Customs and Central Excise authorities went on to add two more digits. This resulted in an eight-digit HSN classNameification.

Almost all goods in India are classNameified using the HSN classNameification code, which facilitates the use of HSN numbers for calculations of the Goods and Service Tax (GST).  The number is currently being used to categorize goods to compute VAT (Value Added Tax).

It's important to remember that the HSN number must be clearly mentioned on GST Invoices when preparing Tax Invoices for GST.

Here's how the different HSN classNameifications, from two digits to eight digits, come into play in India:

  The government gives some form of relief to small taxpayers with annual turnover up to Rs. 1.5 crore in any preceding financial year. After this move, there is no need for small taxpayers to mention HSN codes in their taxable income.

  Taxpayers with a turnover between Rs. 1.5 crore up to 5.00 crore must mention only two digits of the HSN code.

  Taxpayers with a turnover that exceeds Rs. 5.00 crore must mention five digits of the HSN code.

The Importance of HSN Under GST

The HSN system doesn't only help Customs agents-it also has important implications for GST.  It helps in making GST systematic and globally accepted.

By using HSN codes, there is no need to upload a detailed description for each good falling under the GST. This allows for the automation of GST returns, saving time and money for the tax authority.

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What is SAC?

Service Accounting Code (SAC) is a unique code that is identical to the International HSN codes in many ways. SACs are issued by Central Board of Indirect Tax to classNameify each service so as to identify the applicable rate of tax on the respective services. These SACs are used at the time of generating invoices for the services rendered.

Format of SAC

The SAC code is a unique 6 digit number that contains two number each for

  Chapter

  Heading

  Sub-heading

Let us understand this with an example, the SAC code for General construction services of mines and industrial plants is 995425 that consists

1)99 is the code that denotes the Chapter and remains constant throughout

2)54 stands for civil engineering works (Heading)

3)3.25 is for general construction services for plants and mines (Sub-heading)

DIFFERANCE BETWEEN HSN AND SAC CODE