HSN Codes for Services: A Guide for GST Taxpayers
- Asharam Swain
- Mar 20
- 6 min read
Updated: May 13
In India, the production, distribution, and use of products and services are all subject to the Goods and Services Tax (GST), a comprehensive indirect tax. Since its introduction on July 1, 2017, the GST has simplified the taxation process by substituting a single tax system for several indirect levies. The GST's applicability to services is one of its key features. We shall examine the many service categories under the GST regime, their classifications, and the ramifications for both consumers and businesses in this article.
Table of Content
What are GST Rates on Services
All goods and services sold in India are categorised under the GST using either the SAC Code system or the HSN Code system. Services are categorised under the SAC Code, while goods are categorised under the HSN Code. Five slabs of GST rates—NIL, 5%, 12%, 18%, and 28%—have been established based on the HSN or SAC code. Any activity performed for another person in exchange for payment is covered by the GST on services. This covers a broad spectrum of endeavours, ranging from professional services to hospitality and more. For efficient administration and compliance, the GST Council, the regulatory body in charge of monitoring the application and enforcement of GST, divides services into many categories. Among these categories are:
Business and Professional Services
Educational Services
Transport Services
Financial and Insurance Services
Healthcare Services
Entertainment Services
Tourism and Hospitality Services
Telecommunication Services
Construction and Real Estate Servic
Government Services
What is an HSN Code?
The Harmonised System of Nomenclature is the complete form of the HSN code. More than 200 nations and economies use it for the following reasons:
A classification that is consistent
Their customs tariffs' foundation
Compilation of data on global trade
Over 98% of the goods traded internationally are categorised using the HSN. The purpose of HSN codes is to increase the standardisation and international acceptance of GST. A complete product summary would no longer need to be posted thanks to HSN codes.
What is the SAC Code?
The Services Accounting Code is known as the SAC code. It is applicable to all services provided in India. In order to identify, categorise, measure, and assess whether the GST applies to services in India, the SAC code system is utilised. The United Nations Central Product Classification (UNCPC) serves as the foundation for the SAC coding system. However, the CBIC has adjusted it to fit the Indian setting. The committee that was established to implement the SAC system in India also suggested some changes that are included in this code and its comments. Services that fall under the SAC code are subject to five distinct tax slabs under the GST regime: 0%, 5%, 12%, 18%, and 28%. However, by default, services that are not listed on the SAC list or that have not been assigned a SAC code will be subject to an 18% GST levy.
GST Rate & HSN Code for Services - Chapter99
Chapter 99: Services SAC Code GST Rate" provides detailed information on various services classified under the SAC (Service Accounting Code) system for GST (Goods and Services Tax) purposes. The table below highlights the GST rates and HSN codes for various services.
Steps to Find the Correct HSN Code for Services
Accurate tax computations and GST compliance depend on identifying the correct HSN code, such as the one for lodging, food, and beverage services. The following techniques can assist you in determining which HSN code is appropriate for your company:
Official GST Website: The most trustworthy place to find HSN codes is the GST webpage. Navigate to "Search HSN Code" under "Services > User Services" from the GST homepage. You have the option to search by description or by HSN. To determine the precise HSN code for your good or service, use the most practical approach.
Reliable Online Resources for Finding HSN Codes: Although accurate, the GST portal might be difficult to use. Using an online HSN code finder tool, is a simpler option. To obtain the necessary HSN code, just enter the product description or pertinent keywords.
Importance of HSN Code in Invoice
GST Compliance: In India, it is essential to accurately include the HSN code in order to comply with GST. The GST rate that applies to each good or service is specified in the code. Errors in tax rates due to incorrect coding could result in penalties.
Legal Requirement: HSN codes on invoices are required by Indian tax authorities. Financial penalties and legal problems may arise if they are not included or if the wrong codes are used.
Preventing Tax Mistakes: Precise HSN classification aids in avoiding excessive or insufficient taxation of goods and services. Accurate tax computation and proper GST rate application are ensured by the appropriate code.
Customs Processing: The HSN code is used by Indian customs officials to determine tariffs when importing or exporting. Correct coding minimises delays and disputes by streamlining customs procedures.
Records and Audits: Accurate HSN code documentation is essential for audits and record-keeping since it guarantees that companies can produce accurate and verifiable transaction records when called upon.
Conclusion
Knowing the tax ramifications of different types of services is essential if you're a small business owner in India or are just getting started. The HSN Code assigned to each service is to be mentioned on your invoice to stay on the right side of the law. Therefore, you must keep track of your service’s HSN code to ensure compliance and run your business smoothly.
FAQ
Q1. What is the HSN code of service?
Goods are segregated on the basis of HSN codes, whereas services are classified with the help of SAC codes. The "Harmonised System of Nomenclature," or HSN code, is a standardised system used for the classification of goods.
Q2. Do HSN codes for services differ based on the service category?
Yes, each type of service has a unique HSN code assigned to it based on its classification under the GST framework.
Q3. Why are HSN codes important for GST taxpayers?
HSN codes help ensure accurate classification of services, facilitating proper tax calculation, compliance, and return filing.
Q4. Can businesses use HSN codes for both goods and services?
Yes, HSN codes apply to both goods and services, though the classification and rates differ between the two.
Q5. Where can I find the HSN codes for services under GST?
HSN codes for services are listed in the GST classification of services on the official GST portal or in GST notifications issued by the government.
Q6. How are HSN codes for services classified under GST?
HSN codes for services are classified under a systematic structure of 6 digits. The first two digits represent the category, and the rest classify specific services.
Q7. What is the significance of HSN codes in GST tax filing?
Correct HSN codes ensure businesses file accurate GST returns, determine the correct tax rates, and avoid penalties for errors.
Q8. Do service providers need to mention HSN codes in GST invoices?
Yes, businesses providing services must mention the correct HSN code on GST invoices for proper tax reporting.
Q9. Are there any exemptions for HSN codes for certain services under GST?
Some services may be exempt from GST or classified under a lower tax rate, but HSN codes must still be used for proper identification.
Q10. How do HSN codes affect GST tax rates for services?
Each service has a specified tax rate under GST, which varies depending on the HSN code. The correct code ensures the correct rate is applied.
Q11. Are HSN codes mandatory for small businesses under GST?
Small businesses with annual turnover under ₹5 crores may not be required to mention HSN codes in invoices for services, though it's advisable to do so for accuracy.
Q12. How do HSN codes for services impact input tax credit (ITC) claims?
Proper use of HSN codes ensures businesses claim the correct ITC on their GST returns, preventing discrepancies and rejections of claims.
Q13. Can HSN codes be used to resolve GST disputes related to service classification?
Yes, HSN codes play a key role in resolving disputes regarding the classification and taxation of services under GST.
Q14. Do service exporters need to mention HSN codes under GST?
Yes, even for exports, service providers must mention the appropriate HSN code for the service they offer, ensuring compliance with GST regulations.
Q15. How frequently are HSN codes for services updated under GST?
HSN codes for services may be revised or updated periodically by the government to align with international standards or changes in GST law.
Q16. What is the SAC code for services?
Under the Goods and Services Tax (GST) framework, a unique six-digit code known as a Service Accounting Code (SAC) is used to classify services for taxation reasons. SAC codes are structured to communicate important information about the type of service being rendered.
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