HSN code
What HSN code means, how it works, a worked example, the mistakes we see and the questions founders ask.
DefinitionAn HSN code is the Harmonised System of Nomenclature number that classifies goods for GST, printed on every invoice: 4 digits for turnover up to ₹5 crore and 6 digits above.
The HSN is a global product classification of about 5,000 headings that India adopted for GST. Each code maps to a tax rate, so choosing the right one decides whether you charge 5%, 18% or 40%. Businesses with aggregate turnover up to ₹5 crore must quote at least 4 digits on B2B invoices (optional on B2C), and businesses above ₹5 crore quote 6 digits on all invoices; exporters use 8 digits. You meet HSN codes when setting up products in billing software, in GSTR-1's HSN summary table, and on e-way bills. What it means for you: a wrong code can mean short payment and a demand with interest, or overcharging that loses you customers. Rate changes, such as the September 2025 rationalisation, are announced by HSN, so keep your product master current.
How HSN code works
HSN codes come from the World Customs Organization's Harmonised System, which India extends to eight digits for customs and uses in shortened form for GST. The first two digits are the chapter (61 is knitted apparel), four digits the heading (6109 is T-shirts), six the international sub-heading and eight the Indian tariff item. The GST rate schedule is written by HSN, so the code decides the rate.
Since April 2021 every tax invoice must carry the HSN: four digits for a business with aggregate turnover up to ₹5 crore in the previous year (optional on B2C invoices), six digits above ₹5 crore, and eight digits on export invoices and under e-invoicing. GSTR-1 carries an HSN-wise summary of outward supplies at the same digit level, and since 2025 the portal validates the codes entered against its master.
Services are classified separately under SAC codes beginning with 99. A business supplying both uses HSN for its goods lines and SAC for its service lines on the same invoice.
A Tiruppur garment exporter sells cotton T-shirts. Its invoices to Indian retailers carry 6109 (four digits, turnover under ₹5 crore). Its export invoices carry 61091000. The GST rate follows the heading and the sale price per piece, so the finance team keeps one master list of HSN and rate per product, and the GSTR-1 HSN summary reconciles to it every month.
Mistakes we see with HSN code
- Picking a code by the product's name rather than its composition or use, and applying the wrong rate for years.
- Printing four digits when turnover crossed ₹5 crore, which the portal now rejects in GSTR-1.
- Using an HSN for a service, or a SAC for goods, because the two look alike.
Last updated 19 October 2026. Checked against the MCA, GST, Income-tax and Trade Marks rules in force for October 2026.
Where you will meet this term
Questions founders ask about HSN code
How many digits of HSN do I need on an invoice?
Four if your aggregate turnover in the previous year was up to ₹5 crore (optional on B2C), six if above ₹5 crore, and eight on exports and e-invoices.
How do I find the right HSN code?
Start from the chapter that matches the material or the function of the goods, then the heading and sub-heading that match the specific product; the GST rate schedule is organised the same way. Our free HSN and SAC code finder gives the code and the rate for a product description.
What happens if I use the wrong HSN?
If the rate is also wrong, the shortfall is recoverable with interest and penalty; if only the code is wrong, GSTR-1 may be rejected or a mismatch notice follows. Correct it with a credit note and a fresh invoice where the rate changed.