In the tax system, registering a corporate organisation is critical for collecting taxes on behalf of the government and claiming Input Tax Credits. Registration of any business organisation is required under GST Law in order to collect tax from consumers and claim Input Tax Credit. If a company entity is unable to register, it will be unable to collect taxes from customers or benefit from Input Tax Credit.

A person who has an aggregate turnover of more than 40 lacs in a fiscal year is required to register under the act, but in other special category states, the aggregate turnover is 20 lacs in a fiscal year for registration of any business structure.

GST Registration

Following the registration of any corporate organisation, the tax authorities issue the Unique Identification Number (UIN), which contains the Permanent Account Number (PAN) and the State-specific number. Basically. The GST Identification Number (GSTIN) is a fifteen-digit number that serves as the Unique Identification Number. The first two digits of the GSTIN reflect the State code, while the following ten represent the taxpayer's Permanent Account Number (PAN).

What is HSN Code?

HSN code is an abbreviation for Harmonized System of Nomenclature code. The World Customs Organization (WCO) first recommended the unique code for all items as a multifunctional worldwide product vocabulary to apply the categorisation of goods consistently worldwide. In 1986, India began utilising HSN codes to classify commodities and products for Customs and Central Excise tariff tax. GST invoices employ the same HSN tariff numbers as Customs invoices.

HSN Code in GST

The HSN begins with a six-digit code. For clarification, the Customs and Central Excise officials added two more digits. The specified HSN code consists of eight digits. The first two digits represent the GST chapter number. The following two numbers represent the chapter headings. The next two digits represent a subheading, while the final two digits represent a further subsection. The commodities in the HSN code are classified using 21 sections, 99 chapters, 1244 headings, and 5224 subheadings.

Requirements for HSN Code Applicability

• HSN does not apply to taxpayers with yearly income less than Rs. 1.5 crore.
• Taxpayers with yearly revenue greater than 1.5 billion but less than 5 billion must use a two-digit HSN code.
• Businesses with an annual turnover above 5 crores must have a 4-digit HSN number.
• The person in charge of import and export must adhere to the eight-digit HSN code.
   

21 Sections of the HSN Code

What is SAC?

The Service Accounting Code (SAC) is a code given by the Central Board of Indirect Tax & Customs (Service Tax Department) to categorise and identify the services provided. Each service supplied has a unique SAC code, just like each product category has a unique HSN.

People who provide services may and should utilise the SAC code to properly comprehend the tax levied on the services they supply and receive.

The Harmonized Method of Nomenclature, an internationally acknowledged system for categorising and codifying all items in the world, is the foundation for SAC (Services and Accounting Code) codes. This solution allows for GST compliance based on worldwide norms.
Where to Provide HSN/SAC Code?

1. Registration for GST

Every firm subject to GST must report the sort of products and services with which they trade. As a result, it is critical to include the exact HSN/SAC code when registering.

2. The GST Rate

If the taxpayer knows the HSN/SAC code for the goods and services, he may readily compute the GST applicable rate.

3. Invoice for GST

When a seller prepares an invoice for products and services, he must include the HSN/SAC code, which is dependent on the overall revenue of his firm.

4. Returns on GST

When the taxpayer submits his GST Return filing, he must include the HSN Summary. The summary includes information about the products and services sold, as categorised by HSN/SAC.

Difference Between HSN & SAC Code

The main differences between HSN & SAC Code are-

1. Complete Form

• Harmonized Nomenclature System
• Accounting Code for Services

2. Structure

• HSN provides assistance in establishing the relevant GST Rates for products.
• SAC contributes to the determination of service-specific GST rates.

3. Published by

• HSN codes are issued by the World Customs Organization (WCO).
• SAC codes have been given by the Central Board of Excise and Customs (CBEC).

4. Applied to

• Code of 8 digits
• A six-digit code

Why SAC Code and HSN Code are Important for Business?

• The HSN/SAC codes will assist businesses in determining the appropriate GST applicable rates for various goods and services.
• These data must be entered during registration.
• These codes assist in identifying certain items and services among the enormous number of goods and services offered.

Conclusion

All products and services subject to GST in India are classified using an HSN code (Harmonized System of Nomenclature) and a SAC (Service Accounting Code), which aids in the removal of barriers to international commerce. These HSN and SAC codes are also used on bills and record-keeping, making it easy to identify the items and services offered. This essay examined the distinction between HSN and SAC codes in GST.