Daily News Analysis

HSN Code or SAC

3rd April, 2021 Economy

GS Paper III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Context: Furnishing 6 digits HSN (Harmonised System of Nomenclature) Code or SAC (Service Accounting Code) made mandatory for GST taxpayers with more than Rs 5 crores turnover.

  • Government has made mandatory that a GST taxpayer having turnover of more than 5 crore rupees in the preceding financial year will have to furnish 6 digits Harmonised System of Nomenclature HSN Code, or Service Accounting Code, SAC on the invoices issued for supplies of taxable goods and services.
  • A taxpayer having turnover of upto Rs 5 crore in the preceding financial year is required to mandatorily furnish 4 digits HSN code on B2B invoices. Earlier, the requirement was 4 digits and 2 digits.
    • HSN codes for goods at 6 digits are universally common. Therefore, common HSN codes apply to Customs and GST. HSN search facility is available on the GST portal.
  • Manufacturers and importers or exporters have been commonly using HSN Codes.
  • Manufacturers were furnishing these codes even in the pre-GST regime.
  • Importers and exporters have been furnishing these codes in import or export documents.
  • Traders would mostly be using HSN codes furnished in the invoices issued to them by the manufacturer or importer suppliers.
  • A large number of GST taxpayers are already furnishing HS codes or SAC at 6 or 8 digits on voluntary basis on the invoices, e -way bills and GSTR 1 returns.

Under GST regime the classification of goods and services have been done depending upon the various groups formed broadly covered as HSN code and SAC code.

About the HS Code:

  • Among industry classification systems, Harmonized System (HS) Codes are commonly used throughout the export process for goods.
  • The Harmonized System is a standardized numerical method of classifying traded products.
  • It is used by customs authorities around the world to identify products when assessing duties and taxes and for gathering statistics.
  • The HS is administrated by the World Customs Organization (WCO) and is updated every five years.
  • It serves as the foundation for the import and export classification systems used in the United States and by many trading partners.
  • The HS assigns specific six-digit codes for varying classifications and commodities.
  • Countries are allowed to add longer codes to the first six digits for further classification.

What is SAC?

  • Service Accounting Code is similar to the International HSN codes adopted by other countries across world.
  • Similarly in GST the applicability of Service Accounting Codes have been defined for identifying the applicability of the respective tax rates to the services.

What is the difference between SAC and HSN code?

  • HSN means Harmonized System of Nomenclature used for classifying goods under GST i.e. Goods and Services Tax.
  • On the other hand the SAC means the Service Accounting Code under which services are classified as per their inclusions in GST law.

How many digits in SAC code?

  • The SAC code is a 6 digit number contrary to the 8 digit HSN code.
  • The same is required to be mentioned in the GST invoices and GST returns.