If you are GST-registered, every product line on your tax invoice is supposed to carry an HSN code. Most shop owners know this. Far fewer know how many digits they need, where to find the right code, or what happens if they get it slightly wrong.
This guide is the short version — written for a shopkeeper, not a tax consultant.
What an HSN code actually is
HSN stands for Harmonised System of Nomenclature. It is an international product classification system, and India uses it under GST to group goods into categories that share a tax rate.
The code is built like a tree. Each pair of digits narrows things down:
| Digits | Level | Example |
|---|---|---|
| 2 | Chapter | 09 — Coffee, tea, spices |
| 4 | Heading | 0902 — Tea |
| 6 | Sub-heading | 090230 — Black tea, in packs of 3 kg or less |
| 8 | Tariff item | 09023010 — a specific type within that sub-heading |
Services use a parallel system called SAC (Services Accounting Code), which usually starts with 99. If you run a repair shop or a salon alongside a counter, your service lines get a SAC; your goods get an HSN.
How many digits do you need?
This depends on your aggregate annual turnover in the previous financial year:
- Up to ₹5 crore — a 4-digit HSN code on B2B tax invoices. For sales to ordinary consumers (B2C), it is optional on the invoice.
- Above ₹5 crore — a 6-digit HSN code on all tax invoices.
The same codes then appear in the HSN-wise summary of your GSTR-1 return, so getting them right on the invoice saves you work at filing time.
Rules change. Before you settle on a setup, check the latest notification on the CBIC website or confirm with your CA — this guide explains the system, it is not legal advice.
If you are under the composition scheme, you issue a bill of supply rather than a tax invoice, and the HSN requirements on the bill are lighter. You still need to know your codes for your returns.
How to find the right code for a product
- Start with the supplier's bill. Your distributor has almost certainly already classified the product. The HSN on their invoice is the best starting point — and if your code differs from theirs, ask why.
- Search the official GST portal. The Search HSN/SAC tool on the GST portal lets you search by product name. Try the general name ("biscuit", "LED bulb"), not the brand.
- Read the chapter description, not just the code. Many products sit close to each other — packaged vs. loose, branded vs. unbranded, by material. The description tells you which side of the line you are on.
- When in doubt, ask once and write it down. A 10-minute question to your CA beats a hundred wrong invoices.
The common mistakes
Using one code for the whole shop. A kirana store does not sell "groceries" under one code. Rice, oil, soap and biscuits all sit in different chapters — and often at different rates.
Copying the code but not the rate. The HSN code and the GST rate go together. If you change a product's code, check that its tax rate still matches.
Mixing up similar products. Ready-made garments, for example, are classified by fabric and type, and the rate can depend on the sale price. Two shirts on the same shelf can carry different codes.
Never revisiting the list. Rates and classifications are revised from time to time. Once or twice a year, skim your top-selling items and confirm nothing has moved.
Set it once, then stop thinking about it
The real headache with HSN codes is not finding them — it is typing them on every bill. The fix is to store the code on the product, not on the invoice.
In MyShoppingBill, every item has its own HSN code and tax rate field. Fill them in when you add the product (or when you import your item list from a Google Sheet), and from then on:
- every sales invoice picks up the code and rate automatically,
- the CGST and SGST breakup is calculated for you,
- purchase bills, returns and estimates carry the same code, so your records stay consistent.
A practical way to get there without spending a weekend on it:
- List your top 50 selling items — they make up most of your bills.
- Copy the HSN code from your supplier invoices for each one.
- Add the code and rate to those products first.
- Fill in the rest as they come up at the counter. Each item only needs it once.
A quick checklist
- I know whether I need 4 or 6 digits, based on last year's turnover.
- My top-selling items each have their own HSN code and GST rate saved.
- My codes match my suppliers' codes, or I know why they don't.
- Service lines (if any) use a SAC, not an HSN.
- I review my codes once or twice a year.
Get those five right and HSN codes stop being a monthly worry and become something your billing software simply handles.