HSN & SAC Codes in GST: Mandatory Reporting Guide for 2026

What Are HSN and SAC Codes?

HSN stands for Harmonised System of Nomenclature — a globally standardised, six-digit system developed by the World Customs Organisation (WCO) for classifying goods. SAC (Services Accounting Code) is the Indian equivalent for services, maintained by the CBIC. Under GST, every taxable supply must carry its corresponding HSN or SAC code on the invoice, e-way bill, and GSTR-1.

Using the wrong code — or omitting it entirely — is not just an administrative lapse. It can invite scrutiny notices, ITC mismatches, and penalties under Section 122 of the CGST Act. For CA firms managing multiple clients across manufacturing, trading, and services, getting these codes right is a daily operational necessity.

HSN Code Digit Requirement by Turnover

CBIC made 6-digit HSN mandatory from April 2021, with requirements scaled to annual aggregate turnover (AAT):

Key Clarifications

• Turnover refers to the previous financial year's AAT, not the current year.
• Nil-rated and exempt supplies must appear in Table 8 of GSTR-1 with HSN codes, even if not mandatory on B2C invoices for sub-₹5 crore taxpayers.
• For e-Invoicing (applicable where AAT > ₹5 crore since August 2023), 6-digit HSN is mandatory at the IRP portal level — regardless of the turnover table above.

SAC Codes for Services

Service providers use SAC codes — six-digit codes beginning with "99". Common ones that CA firms encounter daily:

• 998221 — Accounting and bookkeeping services
• 998222 — Payroll services
• 998231 — Tax consulting and preparation services
• 998211 — Legal advisory and representation services
• 9954 — Construction services (sub-codes differentiate residential, commercial, etc.)
• 9963 — Accommodation and food services (broad; further sub-codes apply)

SAC Codes and RCM

Certain SAC codes attract Reverse Charge Mechanism (RCM). Legal services by advocates (SAC 998211) to a business entity are taxable under RCM per Notification 13/2017-CT(R). The recipient must raise a self-invoice, pay 18% GST, and report it in Table 3.1(d) of GSTR-3B. Missing this obligation results in interest at 18% p.a. plus potential penalty under Section 122.

Mandatory HSN/SAC Reporting in GSTR-1

From January 2022, Table 12 (HSN Summary) in GSTR-1 became non-optional for all taxpayers. Blank or dummy HSN entries are now rejected at the filing stage.

Populating Table 12 Correctly

1. 1Group all outward supplies by their HSN or SAC code for the tax period.
2. 2For each code, report:

- UQC (Unit Quantity Code) — NOS, KGS, MTR, SQM, LTR, etc.

- Total quantity supplied during the period

- Taxable value and corresponding IGST/CGST/SGST amounts

1. 1Reconcile before filing: the sum of taxable values in Table 12 must match Tables 4 and 5 (B2B and B2C supplies). A discrepancy triggers automated mismatch notices from the GST portal.

Errors That Generate Notices

• Using "NOS" for items measured in kilograms or metres — this flags systemic data-quality issues during portal validation.
• Mixing 4-digit and 6-digit codes for the same HSN within the same return period.
• Bundling goods and services under a single SAC in composite or turnkey contracts — auditors expect them clearly segregated.

Penalty for Wrong or Missing HSN/SAC

Section 122 of the CGST Act provides stiff penalties for invoice-level errors that cause a revenue shortfall:

• ₹10,000 per invoice or 100% of the tax short-paid, whichever is higher, where the error leads to tax evasion.
• For genuine mistakes with no revenue loss, Section 125 imposes a general penalty of up to ₹25,000 per financial year.
• Repeated Table 12 mismatches attract scrutiny notices under Section 61, requiring a written explanation within 15 working days.

The GST portal's automated mismatch engine cross-references Table 12 figures against supply tables and checks HSN-to-rate mappings — making it increasingly difficult for classification errors to go undetected.

Finding the Right HSN or SAC Code

For Goods

1. 1Use the CBIC GST portal's HSN Code Search (GST Rates section) — enter a product description and confirm the applicable rate.
2. 2Because HSN determines the GST rate, an incorrect code can mean underpaying or overpaying tax, creating compliance exposure either way.
3. 3For manufactured and exported goods, consult the Customs Tariff Act 1975 for the full 8-digit classification.

For Services

1. 1Refer to CBIC Circular 56/30/2018-GST for the complete SAC schedule.
2. 2For bundled or composite services, apply the principal supply rule: the SAC of the dominant element governs both the tax rate and GSTR-1 reporting.
3. 3For digital, cloud, or OIDAR services, check CBIC's post-2021 clarificatory circulars — several cover subscription software, SaaS, and online platforms specifically.

How corpus Helps

Managing HSN and SAC codes across 30–50 clients — each with different turnover slabs, item masters, and filing cycles — is exactly the kind of repetitive, error-prone task that corpus was built to eliminate.

• Auto-mapped HSN/SAC: corpus links each item in a client's product or service catalogue to its correct code at item-master level, so every invoice carries the right classification from the moment it is created.
• Digit-level enforcement: the platform reads each client's previous-year aggregate turnover and automatically applies the 4-digit or 6-digit rule — no manual overrides needed.
• Pre-filing Table 12 check: before GSTR-1 is submitted, corpus runs a reconciliation that flags any mismatch between the HSN summary and supply tables, giving you time to correct errors before they become notices.
• RCM auto-flagging: corpus identifies RCM-applicable SAC codes on incoming purchase invoices, auto-posts the GST liability to the correct ledger, and prompts self-invoice creation — closing the compliance loop at month-end.

For a CA firm filing 50 returns each month, that translates to hundreds of line items audited automatically before a single return reaches the GST portal.

Conclusion

HSN and SAC codes sit at the foundation of GST's compliance data architecture. With mandatory 6-digit reporting for e-invoice taxpayers, compulsory Table 12 since January 2022, and an automated portal mismatch engine that runs continuously, classification errors are becoming both costlier and harder to correct after the fact.

The right approach is to embed code verification into your pre-invoice and pre-filing checklists — and use a platform that enforces those checks automatically. If your current accounting software still requires manual HSN entry for every line item across dozens of clients, a purpose-built GST-compliant solution will save your team hours every filing cycle.

Ready to eliminate HSN/SAC errors across your entire client base? Book a free corpus demo today and see automated code mapping in action.