Harmonized System of Nomenclature (HSN) and Service Accounting Code (SAC) will be new concepts for most businesses, even though they have been borrowed from existing systems. Businesses need to determine the HSN and or SAC of the goods and services that they sell, since these are mandatory fields in a GST compliant invoice.
HSN is an internal system of naming goods. HSN is assigned to goods by organizing them in a hierarchical manner and is 8 digits long. However, a good can be identified broadly by using no less than 2 digits, and very specifically by using all the 8 digits. Depending on the turnover or nature of sale, a business might be required to quote a 2-digit HSN, a 4-digit HSN or an 8-digit HSN (mandatory for exports).
- A business whose turnover is less than INR 1.5 crore need not quote HSN in the invoice
- A business with turnover between INR 1.5 crore and INR 5 crore will need to quote a 2-digit HSN
- A business with turnover equal to or greater than INR 5 crore will need to quote a 4-digit HSN
- All exports will need to quote 8-digit HSN in the invoice
- Small businesses under composition scheme will not be required to mention HSN codes in their invoices
- At the time of registration/migration, the business taxpayer will be required to mention HSN code of the goods he deals with during registration
SAC is the nomenclature adopted by the GST Council for identifying services delivered under GST. This is similar to the classification that was in existence under the Services Tax regime. Here are some SACs