Compulsory HSN and SAC code in Goods and Services Tax

HSN(harmonized system of nomenclature) and SAC codes (Services Accounting Code) in Goods and Services Tax 

• Under GST, all goods and services supplied in India have been classified – Goods are classified under the HSN Code(harmonized system of nomenclature) and Services are classified under the SAC Code(Services Accounting Code).
• Based on the HSN or SAC code (Services Accounting Code), GST rates have been fixed in 5 kinds of slabs, like 0%, 5%, 12%, 18%, and 28%.

In the Goods and Services Tax regime, each invoice will have to mention the HSN code (harmonized system of nomenclature) for all goods which are sold and SAC code(Services Accounting Code) for all services which are provided.

Businesses will need to be aware of the HSN code list and SAC code (Services Accounting Code) list for all Goods and Services Tax applicable supplies they are dealing in.

Under Goods and Services Tax, the majority of the dealers will need to adopt two, four, or eight-digit HSN codes (harmonized system of nomenclature) for their commodities, depending on their turn-over the previous year. The following are the detailed requirements:

• Enterprises/ Corporate with sales of less than INR 1.5 crores – will not be required to use HSN codes(harmonized system of nomenclature)
• The Enterprises/ Corporate with sales between INR 1.5 crores and INR 5 crores – will be required to use 2-digit HSN codes(harmonized system of nomenclature)
• Enterprises/ Corporate with sales equal to INR 5 crores and above – will be required to use 4-digit HSN codes(harmonized system of nomenclature)
• Imports / Exports -8-digit HSN codes(harmonized system of nomenclature)
• Services -5-digit SAC codes (Services Accounting Code)

Points to Note

• Usually, Small dealers under the composition scheme will not be required to mention HSN/SAC codes in their invoices.
• The above codes will be required to be mentioned in the invoice & mentioned in the GSTR Returns details, which will be submitted on the GSTN website portal.
• Only During the registration process of the GST, it will be appropriate to note the HSN/SAC supply codes of the business activities.
• You can check GST Rate, HSN Code & SAC Code under the GST Regime

Key Analysis of Circular No.163/19/2021-GS has been given for clear understanding objective.

S. No.	Particulars	Rate	Remarks
1	Solar PV Power Projects		It was provided that w.e.f. 1.1.2019, goods and services tax will be paid in the ratio of 70:30 for goods and services in respect of specified Renewable energy projects. Now, even for the period prior to 1.1.2019, the same mechanism will be adopted. The value of goods purchased will be considered to be 70percentage of the gross consideration paid.
2	Copra	5 percentage	Copra is the dried flesh of coconut used for extracting oil. It separates from the shell skin. Dried or fresh coconuts, with or without shells are exempted. Copra is distinguished under goods and services tax  from dried & fresh coconuts. Hence, it attracts goods and services tax at 5 percentage.
3	Pure Henna Powder & leaves	5 percentage	It has been clarified that Henna powder & leaves fall under the Heading 1404 since the heading includes raw vegetable materials primarily used for the purpose of dyeing or tanning, regardless of whether it is used directly or in preparation of dyeing/ tanning extracts. The same goods and services tax rate is applicable for mehndi cones.
4	Fibre Drums	18 percentage	Earlier corrugated boxes and cartons would attract goods and services tax at 12 percentage while the rest would attract the rate of 18 percentage. In the case of fiber drums that are partially corrugated, there used to be a dispute about the rate applicable. To absolve from such dilemma, w.e.f. 1.10.2021 a uniform goods and services tax rate has been prescribed at 18 percentage. Prior to the aforementioned date, even if 12 percentage was charged, it would be considered as fully goods and services tax being paid. No refund will be available if 18percentage was charged prior to 1.10.2021.
5	Fresh & Dried fruit and nuts	Exempt/5 percentage/12 percentage	Fresh fruit & nuts are supplied as plucked. They continue to be called fresh even if chilled. If fresh fruit & nuts are cooked or otherwise, they cannot be considered fresh. Dried fruit & nuts include the ones that are evaporated or dehydrated. Dried fruit & nuts even if partially rehydrated, will retain their identity.
6	BSG, DDGS, and other such residues	5 percentage	These are classifiable under Heading 2303 and attract goods and services tax at 5percentage.
7	Sweet Supari and flavored & coated illaichi	18 percentage	Flavored and coated illaichi consists of cardamom seeds, saffron, artificial sweeteners, and other ingredients. It is considered a value-added item and hence, not treated at par with cardamom which falls under heading 0908. Sweet and flavored illaichi falls under the heading 2106 just like scented sweet supari. The goods and services tax rate applicable is 18percentage.
8	Laboratory Reagents and other goods falling under Heading 3822	12 percentage	It has been clarified that the goods and services tax rate of 12 percentage will be applicable to all goods falling under heading 3822 whether they happen to be diagnostic or laboratory reagents.
9	Inverter/ UPS sold along with external batteries	18 percentage and 28 percentage, respectively	If the price of the Inverter/ UPS, as well as the price of external batteries, is given in the same invoice but separately, then different goods and services tax rates for each will be charged.
11	Pharmaceutical goods falling under the Heading 3006	12 percentage	S. No. 65 of Schedule II mentions an illustrative list. It has been clarified that the goods finding mention under Heading 3006 but not given in entry 65 specifically will also be covered by this entry and attract goods and services tax at 12 percentage.
12	Tamarind Seeds	Nil rate/ 5 percentage	Nil rate is used where the tamarind seeds are for the purpose of sowing and falling under Heading 1209. W.e.f. 1.10.2021, these seeds if falling under the same heading and not used for sowing, will be liable to goods and services tax at 5 percentage.

 

CBIC advisory on Revamped Search HSN Code Functionality in GST  : A revamped & enhanced version of Search HSN Functionality has been launched on the GST Portal. For Complete Details  CBIC advisory click here 

 Summarizing

• Alongside India’s move to GST, begins to move to an online tax system and HSN codes to categorize goods for taxation purposes.
• It’s all designed to bring more homogenous taxation and ease of biz. HSN codes will now be used for filing returns, invoices, etc., rather than written descriptions.
• They will all necessitate a few other prep work from professionals as well as taxpayers, but automated GST compliance remedies are available to assist smooth the transition.

For more details you may refer to Hand Book on Classification under GST Act 

Various Food Industry GST Rates