HSN Full Form Explained: How to Use It Right in Your Export Invoices

When you’re exporting goods or services from India, every line on your invoice matters, not just for payment processing from your client, but also for ensuring GST compliance, smooth customs clearance, and accurate forex tracking.

Yet one field that often confuses many exporters is the HSN Code. Juggling between different questions is common for exporters, such as, is it really mandatory for goods exports? Can the wrong code delay your GST refunds? How do you even choose the right one?

In this article, we unpack it all, demystifying the HSN code, HSN full form, why it matters in your export invoice, and how to avoid the common mistakes that could stall your business.

• HSN Full form is the Harmonized System of Nomenclature. It’s a six-digit code that traders and exporters use to classify their goods based on their nature and value. The system was developed in 1988 by the World Customs Organization and is followed by over 200 countries. Due to its wide adoption, HSN code helps simplify international trade and compliances.
• The significance of HSN code lies in its systematic classification of goods, uniform identification, and simple customization by different countries. It also helps in ensuring consistency in taxation, customs procedures, and trade statistics. It further simplifies invoicing, custom clarifications, and tax calculations.
• From 2025, the government has made it mandatory for businesses having a turnover of more than 1.5 crores to use HSN code for invoicing and filing GST returns. Under this, businesses having a turnover between 1.5 crores-5 crores are required to use 2-digit HSN and those having more than this have to use 4-digit HSN code, which should be updated to 6 digits.

HSN (Harmonised System of Nomenclature) codes are essential for Goods and Services Tax (GST) in India. They categorise goods based on their characteristics and facilitate uniform taxation. Understanding HSN codes ensures accurate tax calculation and compliance with GST regulations.

The HSN code is significant because of its various benefits, such as offering a systematic classification and a standard identification globally. HSN is also customizable by the countries based on the uniqueness of their product, and in India, HSN is used for availing certain GST exemptions. Here are these benefits in detail:

1. Systematic Classification: HSN provides a structured way to classify the goods based on their characteristics, like purpose, material, or origin. This further helps collection of trade statistics without any hassles.

2. Standard Identification: As the goods are classified in a similar way in almost all countries, HSN also supports a streamlined trade without instances of disputes or errors.

3. Easy Customization: Countries can add more digits to the six-digit code to allow further classification based on the varieties and characteristics of a good.

4. Taxation and Exemptions: In India, the code is mentioned in taxpayers’ invoices and returns, which is then used by authorities for verification, and it provides various GST exemptions.

The Harmonized System of Nomenclature is used across more than 200 countries, providing uniform classification and a strong foundation for customs tariffs. Plus, it simplifies the collection of trade statistics. Approximately 98% of the international trade stock is classified using the HSN code.

India became a member of the World Customs Organization in 1971. While initially the 6-digit code was adopted, it was later increased to eight digits for more precision by Customs and Central Excise, under the Department of Revenue.

The HSN system consists of 21 sections divided into 99 chapters, which provide a general description of the product. Each chapter is further classified into 1244 headings and 5224 subheadings. The headings and subheadings offer a more specific classification.

In India, the 8-digit HSN code is used, where the first two digits represent the broad HSN chapter, the next two digits are for the heading, the following two digits are for the subheading, and the last two digits are for the customs tariffs.

To understand the meaning hidden behind these codes, let’s take an example of this code: 69021010. Here,

• The first 2 digits denote chapters, which are a broad classification. So, 69 is for ceramic products.
• The next 02 is for heading and denotes refractory bricks, tiles, blocks, and similar refractory ceramic constructional goods, other than those of siliceous fossil meals or similar siliceous earths.
• 10 after it denotes subhead and is for ceramic products containing, singly or together, more than 50% of the Mg, Ca, or Cr, expressed as MgO, CaO, or Cr2O3.
• The final 10 is for the specific category of magnesite bricks and shapes.

Just like for goods, there’s a widely accepted coded system for services known as Service Accounting Code or SAC. While it’s based on the United Nations Central Product Classification (UNCPC), it’s modified by the Central Board of Indirect Taxes and Customs (CBIC) to make it align with the Indian context.

While the HSN is used all over the globe, SAC is mostly used for services under the Indian taxation framework. It’s also a six-digit code, all starting with 99 to denote the chapter for services. For instance, the SAC code 995426 is for general construction services (denoted by 54) of power plants and their related infrastructure (denoted by 26).

This SAC code under GST helps in service categorization and identification, and GST registration and rate determination. Additionally, as is the case with HSN, SAC codes also need to be mentioned on invoices and when filing GST returns.

As of 2025, the government has made certain changes for compliance of HSN codes in GST. For businesses having a turnover of Rs. 5 crores, the 6-digit HSN code needs to be mentioned on all invoices.

For small businesses, a 4-digit HSN is required. However, they can update to 6 digits to ensure no future problems. Moreover, it’s better to keep yourself updated by going through the CBIC portal for official notifications so you can make changes to your business operations and prevent any compliance issues.

With the introduction of GST, the HSN and SAC codes are displayed on the tax invoices by the businesses under a three-tiered system if they are registered under the GST framework. This classification depends on the AATO (Annual Aggregate Turnover):

• Turnover less than 1.5 crore: Businesses with a turnover of less than 1.5 crore are not required to use HSN code.
• Turnover of 1.5 crore-5 crore: It’s mandatory for businesses with a turnover between Rs. 1.5 crore and Rs. 5 crore to use 2-digit HSN code.
• Turnover above 5 crores: For businesses having a turnover of more than 5 crores have to use a 4-digit HSN code.
• Importers and exporters: Beyond the above three-tiered system, all importers and exporters are required to use a proper 8-digit HSN code. The codes are also mandatory for exporters filing for GST refunds under zero-rated supply claims.
• Other purposes: The codes are also required in shipping bills for customs clearance, in bank compliance documents, while filing for eFIRC/FIRA/eBRC, and in GSTR-1 filing.

An important thing to be mindful of is that not mentioning HSN or SAC code or even incorrectly mentioning them while filing for GST returns can incur a penalty of up to Rs. 50,000: Rs. 25000 under CGST and Rs. 25000 under SGST.

The main difference between HSN and SAC code is that the HSN code is used to classify goods and the SAC code is mostly used to categorize services. The primary differences between HSN and SAC codes are summarized in the table:

You can find the correct HSN or SAC code by visiting the GST portal, where the code is present under the User Services section. Another way is to visit the CBIC’s website where you can find the code in the official classification. Here’s how:

1. GST portal: On the GST portal, navigate to Services-User Services-Search HSN. Here you can either verify the code for your goods or get a code based on the description you provide.

2. CBIC’s official classification: For SAC code, you can use the classification provided by the CBIC under the five GST regime slab rates.

Quick Tip-Don’t try to use a single code for different services that may be similar. Use a proper code for various categories of services. Otherwise, you may end up with a ‘clarification’ notice from GST.

While submitting your invoices for exports, make sure to follow these simple steps for efficient payment processing:

• Make sure the HSN or SAC code is mentioned for each line item.
• Mention all eight digits of the HSN code in your shipping bills and customs declaration in case of export and imports under the GST.
• Apart from these, ensure that you are using the same code for GST returns, e-invoices, and bank documents, as any inaccuracy can lead to hold-ups or compliance issues.

For instance, let’s say you’ve provided digital marketing services to an international client. For this service, you’ll be using the 998365 SAC code. Now, this same code must appear in all of these:

• GSTR-1
• Shipping bill
• The e-invoice you generate
• Bank documents you use when claiming the export refund

HSN code not only helps with systematic classification of goods but also provides certain exemptions from taxes. This is why it’s extremely crucial to be mindful of mistakes that may occur when you have to use the HSN code. Here are some mistakes you must avoid while using an HSN code for the goods you are trading:

• Don’t leave the HSN field blank, particularly for invoices where zero-rates exports. A GST bill will be invalid without HSN code.
• Don’t use inaccurate codes solely on the basis of guesswork or just because other businesses are also using them.
• Avoid using HSN if you’re exporting a service. HSN should only be used in case of physical goods exports.
• Don’t use the same HSN code even if you’ve updated your product offerings. Keep changing the code with the growth of your business.

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