The HSN code is how GST classifies your goods and decides their tax rate. But businesses are often unsure how many digits they must actually print on an invoice. The answer depends mainly on your turnover.
What is an HSN code?
HSN (Harmonized System of Nomenclature) is an internationally standardised system for classifying goods. Under GST, the HSN code links a product to its applicable tax rate. Services use the parallel SAC (Services Accounting Code) system. Quoting the correct code is both a legal requirement and the basis for charging the right rate.
The turnover-based digit rules
The number of digits you must quote is tied to your aggregate annual turnover:
| Aggregate turnover | HSN digits required (B2B) | B2C |
|---|---|---|
| Up to ₹5 crore | 4 digits | Optional |
| Above ₹5 crore | 6 digits | 6 digits |
So a small trader below ₹5 crore quotes at least 4 digits on B2B invoices, while a larger business above ₹5 crore quotes 6 digits on all tax invoices.
B2B vs B2C
The relaxation for small taxpayers applies to B2C supplies. If your turnover is up to ₹5 crore, you may omit the HSN code on B2C (consumer) invoices — though quoting it is good practice. For B2B supplies, at least 4 digits are required regardless. Above ₹5 crore, 6 digits are required on both B2B and B2C.
HSN reporting in GSTR-1
Beyond the invoice, you must also report an HSN-wise summary in GSTR-1 (in the HSN Summary section). The digit requirement mirrors the invoice rules — 4 digits up to ₹5 crore, 6 digits above. The portal increasingly validates HSN entries against a master list, so accuracy matters.
Getting the classification right
An HSN code is only useful if it is correct. The same-sounding product can sit under different headings with different rates, and a wrong code can mean a wrong rate — which invites demand notices and interest. When in doubt:
- Search by product description in a reliable HSN/SAC code finder.
- Match the description as closely as possible, not just the first result.
- For borderline goods (e.g. cosmetic vs medicament), confirm with a professional.
- Once you settle a code for a product, use it consistently across invoices.
Penalties for wrong or missing codes
Not mentioning the HSN/SAC code, or issuing an incorrect invoice, is a contravention that can attract a general penalty under Section 125 (up to ₹25,000). The bigger risk, however, is misclassification: charging the wrong rate can lead to short payment of tax, interest, and disputes with the department or your customers.
A quick example
A trader with ₹2 crore turnover selling cotton T-shirts to a registered retailer:
- Turnover is under ₹5 crore → 4-digit HSN minimum on the B2B invoice
- They quote the 4-digit heading for the garment (and could quote 6 or 8 digits for precision)
- The same 4-digit-level summary goes into the HSN Summary of GSTR-1
The bottom line
Below ₹5 crore, quote at least 4-digit HSN on B2B invoices (optional on B2C); above ₹5 crore, quote 6-digit HSN on all invoices. Services follow the same logic with SAC codes. Quoting more digits is always allowed — and getting the classification right matters far more than the bare minimum.
Find the correct HSN or SAC code for any product or service with the free HSN & SAC code finder.