Why HSN & SAC Codes Matter on Indian GST Tax Invoices: Slabs & Penalties Explained
Elvora Compliance Team
Tax Architecture & Accounting Research
Executive Summary & Key Takeaways
HSN codes classify products under international trade standards. Here is how to configure them correctly to avoid audit notices.
- Businesses with turnover above ₹5 Crore must report 6-digit HSN codes on B2B invoices.
- Businesses with turnover up to ₹5 Crore must report minimum 4-digit HSN codes on B2B invoices.
- Services use 6-digit SAC codes, all starting with 99.
- Entering incorrect HSN codes can result in penalties up to ₹50,000 under Section 125 of the CGST Act.
1. What is an HSN Code?
HSN stands for Harmonized System of Nomenclature, a multipurpose international product nomenclature developed by the World Customs Organization. In India, it standardizes GST tax slabs across millions of commodities.
2. Mandatory Digit Rules
• Turnover > ₹5 Crore: 6-digit HSN code mandatory for all B2B invoices. • Turnover <= ₹5 Crore: 4-digit HSN code mandatory for B2B invoices; optional for B2C retail.
Frequently Asked Questions
Can I assign HSN codes during CSV product import in Elvora?
Yes. Elvora's bulk CSV import validates HSN codes, GST slabs, and purchase/selling prices automatically.
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