Distinction between HSN code, SAC code and GST rate

With the implementation of GST, the number of compliances the taxpayers are required to follow has been increased significantly. One of the mandatory requirements of GST is that every person making a supply is required to generate the invoice by specifying the HSN code and the SAC code against each product sold or every kind of service provided. Further, the GST rate applicable on each item shall also be specified on the invoice. After a long period of research and discussion, the GST slabs are being determined by the government. GST rates are allocated to good and services by keeping in mind that they have a least adverse impact on the end consumer.

GST Rate

GST rate is a certain percentage of tax that every taxpayer is required to pay to avail service or to buy a good. Under GST regime four tax slabs are pegged at 5%, 12%, 18% and 28%. GST rate that is applicable to the product is the combination of four rates SGST, CGST and IGST. All goods and services will be categorized through the HSN code or the SAC code and they will come under the slab rate defined by the government.

HSN Code

Harmonized System of Nomenclature (HSN) is a term given to the product description and coding system that is developed by the World Customs Organization (WCO). More than 200 economies use HSN for collecting Custom tariffs and international trade statistics. HSN classify more than 5000 products and is accepted in the whole world.

Under GST regime every product is given a unique HSN code. HSN code consists of 21 sections with 99 chapters, 1244 heading, and 5224 subheadings. The 21 Sections are further divided into 99 Chapters. Each chapter can be named as two-digit HSN number. Again each two-digit HSN number is sub-classified to 4 digit HSN code. Based on such 4 digit HSN codes, the sub -classification is done as 6 digit HSN code. The products are arranged in terms of technological complexity and products degree of manufacture.

SAC Code

Services Accounting Code(SAC) is used to classify the services falling under the Goods and Service Tax regime. The SAC codes are already prescribed for each type of service under the service tax regime.

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