HSN vs SAC Codes: A Practical Guide for Small Businesses

Every line on a GST invoice should carry a code that tells the tax system exactly what is being sold. For goods that code is called the HSN code. For services it is the SAC code. They look like small details, but they decide which GST rate applies, they feed into your returns and they are one of the first things a client's accounts team checks. This guide explains what each code is, how many digits you need, how to find the right one, and which codes freelancers use most.

HSN: the code for goods

HSN stands for Harmonised System of Nomenclature, an international classification of traded goods developed by the World Customs Organization. The system uses six digits worldwide. India adds two more, so Indian customs codes run up to eight digits. Every physical product, from printed books to furniture to laptops, has a heading in this system.

Example headings:

• 4911: printed matter, including pictures and photographs
• 9403: furniture
• 9405: lamps and lighting fittings
• 8471: computers and their units

SAC: the code for services

SAC stands for Services Accounting Code. It is a six-digit code issued by the government to classify services for GST. Every SAC begins with 99. Unlike HSN, SAC is not an international standard. It was adapted from the earlier service tax classification.

The structure of a SAC is hierarchical. Take 998314, "IT design and development services":

• 99: the prefix for services
• 9983: other professional, technical and business services
• 99831: IT and related services
• 998314: IT design and development services

The more specific the six-digit code, the less room there is for argument.

HSN vs SAC at a glance

	HSN	SAC
Applies to	Goods	Services
Origin	World Customs Organization	Indian classification for GST
Length	4 to 8 digits	6 digits
Starts with	Chapter number (01 to 97)	99
Example	9403 (furniture)	998314 (IT design and development)

How many digits do you have to show?

The number of digits you must quote on an invoice depends on your turnover. The current framework is:

• Aggregate turnover up to ₹5 crore: at least 4 digits on B2B invoices.
• Aggregate turnover above ₹5 crore: at least 6 digits on both B2B and B2C invoices.
• Exports and imports: 8 digits for goods.

In practice, quote the full code whenever you can. For services you will almost always be looking at a six-digit SAC anyway, and many accounting packages and client portals expect it. A short or missing code is more likely to get an invoice sent back.

Why the code matters

1. It determines the GST rate. Rates are notified against HSN and SAC headings. Using the wrong code can mean charging the wrong rate.
2. It feeds your returns. Your GSTR-1 includes an HSN/SAC-wise summary of outward supplies. A mismatch between invoice codes and your return can trigger notices.
3. It matters for your client. Their credit claim and their records are matched against your invoice, and wrong classification makes reconciliation harder.
4. It affects disputes. In case of an audit, the code is the first piece of evidence about how you understood your own supply.

SAC codes freelancers use most

The table below lists headings that commonly appear on freelancer invoices. These are widely used, but classification can depend on your exact service, so treat it as a starting point and confirm with an accountant.

SAC	Service
998311	Management consulting and advisory
998312	Business consulting (strategy, operations)
998313	IT consulting and support
998314	IT design and development (websites, apps, software)
998315	Hosting and IT infrastructure provisioning
998361	Advertising services (marketing, social media, SEO)
998381 to 998387	Photography services (portrait, event, advertising, processing)
998391	Specialty design (graphic, interior, fashion, industrial)
998395	Translation and interpretation
998399	Other professional, technical and business services
998596	Event planning and management
999293	Commercial training or coaching

For ready-made examples, see the web developer, graphic designer and photographer templates, which already carry sensible codes.

How to find the right code

1. Start with what you actually do, in one sentence. "I build websites for small businesses" points to IT design and development.
2. Search the official list. The GST portal has a search for HSN and SAC. The government's rate notification for services (Notification 11/2017 Central Tax (Rate) and its amendments) lists services by heading, so you can match your work to a heading and see its rate.
3. Pick the most specific heading that fits, not the most general one. "Other professional services" is a last resort.
4. Check how similar businesses classify the work. Your own accountant or a trade association will often know the convention.
5. When two codes seem to fit, consider the main purpose of the supply. If you build a website and also design its logo, the website may be the principal service and the logo an ancillary part of it.
6. Write it down once decided and use it consistently. Consistency over time is a strong defence.

Mixed and composite supplies

Many freelance projects bundle several elements. GST law distinguishes two situations:

• A composite supply has parts naturally bundled together, with one principal supply. The whole bundle takes the tax treatment of the principal supply. A website build that includes hosting for the first year is often treated this way.
• A mixed supply is a package of items that could be sold separately, sold together for a single price. It is taxed at the rate of the item with the highest rate.

If you are unsure, show the elements on separate lines with their own codes, for example design under 998391 and development under 998314. The totals come out the same when the rates match, and the client sees what they paid for.

HSN codes for the goods you might sell

Freelancers sometimes sell physical items alongside services: a printed album, framed prints, furniture for an interior project or stationery. List each with its HSN code and a rate that fits that product. Do not use a service code for goods or a goods code for services. The interior designer template shows the pattern, with design fees under a SAC and furniture under an HSN.

Common mistakes

1. Leaving the code blank. It is one of the easiest ways to have an invoice questioned.
2. Copying a code from a friend without checking it matches your service.
3. Using a goods HSN for a service (and vice versa).
4. Putting the wrong rate with the right code. Rates are tied to the heading, so check them when notifications change.
5. Using the generic "other" code when a specific one exists.
6. Changing codes from invoice to invoice for the same work without a reason.

What to do when you are not sure

A short conversation with a chartered accountant is worth the fee, especially for unusual work or large contracts. For disputed classification, taxpayers can seek an advance ruling, and past rulings are published and searchable. For everyday freelance work, though, the headings above cover most cases.

Use the codes in BillBuddy

In the BillBuddy generator, each line item has an HSN/SAC field. Enter the code once, choose the GST rate, and it flows into the line, the tax summary and the PDF. If you are choosing a code for the first time, start from the invoice template for your profession and adjust it to match your actual service. For the full list of what else an invoice must carry, read what a GST invoice contains.

This article is general information, not tax or legal advice. Classification depends on facts and changes over time. Confirm with a qualified professional.