HSN stands for Harmonised System of Nomenclature, the international system for classifying goods. India uses it for customs and for GST. Every item you sell has an HSN code, and the code decides the GST rate. Getting it right on the invoice, and in the HSN summary of GSTR-1, is one of the simplest ways to avoid questions from the department and from buyers.
01How the code is built
HSN codes narrow down digit by digit. The first 2 digits are the chapter, the first 4 the heading, the first 6 the sub-heading used across the world, and India adds 2 more for an 8-digit tariff item.
| Digits | Example | What it covers |
|---|---|---|
| 69 | Chapter 69 | Ceramic products |
| 6907 | Heading | Ceramic flags and paving, hearth or wall tiles |
| 6907 21 | Sub-heading | Those with water absorption up to 0.5% by weight, which includes vitrified tiles |
| 6907 21 00 | Tariff item | The full Indian code |
Services use the Services Accounting Code (SAC), which starts with 99. An Ahmedabad CA firm's audit fees fall under 998221, and a Pune software company's development work under 998314.
02How many digits your invoice needs
Rule 46 of the CGST Rules requires the HSN code on a tax invoice, and Notification 78/2020-Central Tax sets the number of digits from 1 April 2021:
| Aggregate turnover in the previous financial year | Digits on the invoice |
|---|---|
| Up to ₹5 crore | 4 digits on B2B invoices. Optional on invoices to unregistered buyers. |
| More than ₹5 crore | 6 digits on all invoices |
Turnover here is aggregate turnover on your PAN across India, including exempt sales and exports. A Morbi tile maker with ₹4.2 crore last year can print 6907. Once it crosses ₹5 crore, the next year's invoices need 6907 21.
You can always show more digits than the minimum. Many businesses print the full 8 digits because their item master already has them.
03Why the code matters for the rate
The GST rate is set against HSN codes in the rate notifications. Two items in the same shop can carry very different rates. In a kirana store, as of October 2026, packaged namkeen under 2106 is taxed at 5%, while aerated soft drinks under 2202 are taxed at 40%. A wrong code can mean the wrong rate, which means tax short paid with interest, or tax overcharged to your customer.
Rates were revised widely from 22 September 2025. If your item list was set up before then, check each code's rate against the current notification.
04The HSN summary in GSTR-1
Table 12 of GSTR-1 asks for a summary of your sales by HSN: code, description, unit, quantity, taxable value and tax. As of October 2026:
- The table is split into B2B and B2C parts.
- HSN codes are picked from a list on the portal, which rejects codes that do not exist.
- The minimum digits follow the same ₹5 crore line: 4 digits up to ₹5 crore, 6 digits above.
The totals in Table 12 should agree with the invoices reported in the rest of GSTR-1. If they do not, the portal may show a warning, and the difference often points to an invoice that was entered without an item code.
05A worked example
An electrical goods distributor in Lucknow with ₹9 crore turnover sells to contractors and shops. One month's HSN summary looks like this:
| HSN | Description | Quantity | Taxable value | GST at 18% |
|---|---|---|---|---|
| 854449 | Insulated copper wire | 1,200 coils | ₹18,60,000 | ₹3,34,800 |
| 853620 | MCBs | 4,500 pieces | ₹12,15,000 | ₹2,18,700 |
| 853650 | Modular switches | 22,000 pieces | ₹9,90,000 | ₹1,78,200 |
Because turnover is above ₹5 crore, each line uses 6 digits, and each invoice must show them too.
06Common mistakes
- Using the same 4-digit code for items with different rates. Check whether the rate changes at 6 or 8 digits.
- Copying a supplier's code without checking it. The supplier may be wrong too.
- Leaving the code blank on service invoices. SAC is needed as well.
- Not updating the item master after a rate change.
- Units that do not match. The HSN summary needs a unit quantity code such as NOS, KGS or BOX, used the same way every time.
07Setting up an item master
Give each item one code, rate and unit when you first add it, and use the 8-digit tariff code where you can find it. Note the notification and date you checked the rate against. When a rate notification comes out, search the item list for the affected headings and update them in one sitting. A Bhiwandi trader with 2,000 items finds this takes an afternoon if the codes are already clean, and several days if half the items have no code.
08E-invoices and e-way bills
Businesses with turnover above ₹5 crore must use at least 6 digits on e-invoices and e-way bills as well. Others use at least 4. See the e-invoice guide and the e-way bill guide.
09Goods and services on one invoice
A Rajkot motor rewinding shop that sells winding wire and charges for rewinding puts HSN 8544 on the wire line and the SAC for repair services on the labour line. Each line carries its own rate. Keeping goods and services as separate items in your master is what makes this automatic.
Where one item could fall under two headings, the classification rules in the customs tariff decide, and a written note of why you chose a code helps if it is questioned.
This guide is general information as of October 2026 and does not amount to tax advice.
In MatruOS, each item carries its HSN code and GST rate, so every invoice line shows them, and the GSTR-1 file includes the HSN lines.