If you sell goods under GST, every item on your invoice needs an HSN code. Get it right and your invoices and returns are clean; get it wrong and you risk the wrong tax rate and mismatches in your filings. Here's what HSN codes are and how to use them correctly.
What is an HSN code?
HSN stands for Harmonized System of Nomenclature — an internationally recognised system for classifying goods. Each product category has a number, and that number determines how the item is described and taxed. Services use a similar system called SAC (Services Accounting Code).
How many digits do you need?
Under GST, the number of HSN digits required on a B2B invoice depends on your turnover:
- Turnover up to ₹5 crore: 4 digits
- Turnover above ₹5 crore: 6 digits
- Exports/imports: 8 digits
More digits mean a more specific classification. Using too few digits where more are required is a common compliance slip.
How to find the right HSN code
- Start broad, then narrow. HSN is hierarchical — the first 2 digits are the chapter, the next 2 the heading, and so on. Identify the general category first.
- Use the official search on the GST portal or the CBIC HSN directory.
- Match the product, not the brand. Classify by what the item *is* (e.g. "stainless steel utensil"), not its marketing name.
- When unsure, ask your CA. Borderline items (mixed goods, kits) can be genuinely ambiguous.
Once you've confirmed an item's HSN, you only need to do it once — store it against the item in your system.
Why HSN matters beyond the invoice
- It drives the GST rate applied to each line.
- It feeds the HSN summary table in your GSTR-1 return.
- Mismatched HSN between you and your buyer is a frequent cause of reconciliation queries.
Let your software carry the HSN for you
Re-typing HSN codes on every invoice is slow and risky. The better approach: set the HSN once per item and let the software apply it automatically on every invoice, then build the HSN summary for your returns from real data.
That's how CraveInvoice works — each item stores its HSN/SAC and GST rate, so every invoice is classified correctly and your HSN summary is ready at filing time. Explore GST accounting software to see it in action.