SAC Code vs HSN Code: Differences Explained

A business sells packaged food and also charges customers for installation services. Under GST, those two supplies are not classified in the same way. The goods are identified using an HSN code, while the service is classified using a SAC code.

That distinction matters because the correct classification helps determine the applicable GST rate, supports accurate invoicing, and reduces errors in GST reporting.

SAC stands for Services Accounting Code, while HSN stands for Harmonized System of Nomenclature. HSN is used for goods, whereas SAC is used for services.

This guide explains SAC code vs HSN code, their full forms, structure, GST usage, examples, and how businesses can identify the correct code.

What is an HSN code?

HSN stands for Harmonized System of Nomenclature. It is an internationally recognised system used to classify goods.

The system groups products into sections, chapters, headings, and subheadings based on their characteristics.

Under GST, businesses use HSN codes to identify goods and determine the relevant tax classification.

What is an SAC code?

SAC stands for Services Accounting Code.

SAC codes are used under GST to classify services rather than physical goods.

Service classifications fall under Chapter 99 of the GST classification system.

An SAC code generally contains six digits and identifies the specific nature of the service being supplied.

SAC code vs HSN code: what is the difference?

The easiest way to remember the difference is:

Goods = HSN
Services = SAC

How are HSN codes structured?

HSN codes become more specific as additional digits are added.

Broadly:

• the first two digits identify the chapter
• the next two identify the heading
• additional digits identify increasingly specific subheadings

Businesses should classify the actual product rather than choosing a code simply because its description looks similar.

How are SAC codes structured?

SAC classifications for services generally use six digits.

The service classification begins within Chapter 99, after which the remaining digits narrow the category down to a particular type of service.

Common SAC codes for Service Exporters

Service exporters must mention the correct SAC (Services Accounting Code) on every export invoice, GST return, and refund claim. Every SAC code starts with 99, and choosing the one that best matches your service keeps your invoices, FIRA purpose codes, and GST filings consistent. Here are the codes most commonly used by Indian businesses and freelancers serving overseas clients.
Since services exported to overseas clients are zero-rated under GST, use the correct SAC on your invoices even when no GST is charged, and file a Letter of Undertaking (LUT) to export without paying IGST.

How many HSN digits are required under GST?

The number of HSN digits required on invoices depends on the taxpayer's Aggregate Annual Turnover (AATO) and applicable GST requirements.

Under the current GST framework:
Businesses covered by e-invoicing should also ensure that the HSN entered is valid under the e-invoice system.

Where are HSN and SAC codes used?

Businesses commonly use HSN or SAC codes in GST invoices, e-invoices, returns, credit and debit notes, and accounting systems. HSN codes also play a wider role in customs and international trade.

What is the HSN/SAC column on an invoice?

The HSN/SAC column on a GST invoice shows the classification code for each item being billed. HSN (Harmonized System of Nomenclature) codes are used for goods, while SAC (Services Accounting Code) codes are used for services. Together, HSN and SAC codes tell the tax department exactly what you’re selling, which in turn decides the GST rate that applies to it.

Because a single invoice can include both goods and services, most invoice formats combine them into one column labelled “HSN/SAC.” For example, a business selling a laptop with an installation service would list the laptop’s HSN code and the installation service’s SAC code on separate lines of the same invoice.

Example of the HSN/SAC Column

How HSN and SAC Codes Differ

HSN codes apply to goods and are based on an international system used by over 200 countries, so they range from 2 to 8 digits depending on how specific the classification is. SAC codes apply only to services, are part of India’s GST system, and are 6 digits long, always starting with 99.

How Many Digits Do You Need?

The number of digits you must show depends on your annual turnover. Businesses with turnover up to ₹5 crore must show at least a 4-digit HSN code on B2B invoices, while those with turnover above ₹5 crore must show at least a 6-digit code on all invoices. SAC codes are always written in full. The same codes must also be reported in the HSN summary of your GSTR-1 return, so using the correct code on your invoice from the start avoids mismatches when you file.

How do you find the correct HSN or SAC code?

Start by identifying exactly what you are supplying.

For goods

Check these details in the product:

• material
• function
• composition
• level of processing
• technical characteristics

Then compare it with the relevant HSN heading and description.

For services

Identify the actual nature of the service.

For example, “technology” is too broad. Software development, IT consulting, hosting, and other technology services may fall under different service descriptions.

Why does the correct HSN or SAC code matter?

Correct classification helps businesses apply the right GST rate, issue accurate invoices, maintain consistent GST reporting, and, for goods, support customs and tariff classification.

What if a business sells both goods and services?

A business can use both HSN and SAC codes.

For example, an electronics company may:

• sell equipment classified using an HSN code
• charge for installation or maintenance classified using the relevant SAC code

Each line item should be classified based on what is actually being supplied and the GST treatment applicable to the transaction.

Where goods and services are supplied together, businesses should also consider GST rules relating to composite and mixed supplies rather than automatically splitting every component.

SAC codes on export of services invoices

When you provide services to clients outside India, your invoice still needs the correct SAC code, even if no GST is charged. Exported services are treated as zero-rated supplies under GST, which means the tax rate is effectively zero, but they’re still reported as taxable supplies. The SAC code tells the tax department exactly what service you exported, and it must match what you report in your GST returns and refund claims.

When a Service Counts as an Export

A service qualifies as an export under GST only when all of these conditions are met: the supplier is located in India, the client is located outside India, the place of supply is outside India, payment is received in convertible foreign exchange (or in Indian rupees where the RBI permits it), and the supplier and client are not simply two branches of the same business. If any condition isn’t met, the service is treated as a domestic supply, and regular GST applies.

Exporting Under LUT vs Paying IGST

Service exporters have two options. The most common is to export under a Letter of Undertaking (LUT), which lets you invoice overseas clients without charging IGST and then claim a refund of the input tax credit you’ve accumulated. The other option is to pay IGST on the export and claim a refund of that tax later. Most exporters choose the LUT route because it avoids blocking cash in tax payments. You can read more in our guide to mastering exports under LUT in GST.

What to Include on an Export of Services Invoice

Keep Your SAC Code Consistent Everywhere

Use the same SAC code on your invoice, in Table 6A and the HSN summary of your GSTR-1 return, and in any GST refund application. It should also line up with the purpose code on your FIRA or FIRC, since both describe the same service. Mismatches between these documents are one of the most common reasons GST refund claims on exported services get delayed or rejected.

Common HSN and SAC code mistakes

Avoid:

• using SAC codes for goods or HSN classifications for services
• copying codes from unrelated invoices
• choosing classifications only by searching a broad product name
• using outdated product or service masters
• applying a GST rate without verifying the underlying classification
• assuming every international HS code maps identically to India's detailed tariff classification

For Indian businesses selling internationally, correct classification is one part of the transaction. The next step is collecting and reconciling the overseas payment efficiently.

PayGlocal helps Indian businesses accept international payments and maintain clearer transaction and settlement records, making cross-border collections easier to manage.