GST HSN SAC

 

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📘 CODES FOR GST ( Goods & Services Tax)

Type	Code Name	Full Form	Digits	Purpose
Goods	HSN Code	Harmonised System of Nomenclature	6–8 digits	To classify goods under GST
Services	SAC Code	Service Accounting Code	6 digits	To classify services under GST.

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• Both codes help in standardized taxation and invoicing under GST.
  
  

• HSN – derived from the World Customs Organization (WCO) system.

HSN code is 6 digits. However, some countries, such as India, add extra digits for more detailed classification, making the code 8 digits long.  Here is a breakdown of the HSN code structure:

• 6-digit HSN: The worldwide standard developed by the World Customs Organization (WCO).

• First 2 digits: Chapter number.

• Next 2 digits: Heading within the chapter.

• Last 2 digits: Subheading within the heading.

• SAC – developed by the Central Board of Indirect Taxes & Customs (CBIC) for services.

8-digit HSN: An expanded code used in some countries, including India, for more precise classification and taxation.

• First 6 digits: The international HSN code.

• Last 2 digits: Additional details, also known as the tariff item. 

• Mention of HSN or SAC on invoices is mandatory depending on turnover thresholds.
  

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GST: Composition Scheme

 

Composition Scheme in GST

• Simplified compliance scheme for small taxpayers 

Eligibility: 

 

• Applicable to Businesses with annual turnover up to Rs. 1.5 Crores (Rs. 75 Lakhs for NE - North Eastern States)

• Can be opted voluntarily at the time of GST registration or beginning of the Financial Year. 

Features:  

• Fixed low tax rate on Turnover.

• Reduced compliance burden i.e., Quarterly returns instead of monthly. 

• No ITC - Input Tax Credit is allowed.

• Service providers are not eligible.  However, restaurants are eligible.

GST Rates under Composition Scheme: 

Type of Business	CGST	SGST	Total
Manufacturer and Trader	0.5 %	0.5%	1 %
Restaurants	2.5%	2.5%	5 %

Ineligible Categories:

• Service providers (except restaurants)

• Manufacturers of ice cream, pan masala, or tobacco

• Dealers making inter-state supply

• Suppliers through e-commerce operators

Advantages:

• Lower tax rate (1% or 5%)

• Easier compliance — less paperwork and filing

• Higher liquidity due to limited tax liability

Disadvantages:

• No inter-state sales allowed

• No input tax credit (ITC) eligibility

• Cannot deal in exempted goods or online platforms (e-commerce)

Indian Railways & Composition Scheme: 

• Indian Railways invites participation from vendors, canteens, and contractors for supply of goods/services.
  
  

• Vendors or contractors registered under the Composition Scheme must keep in mind the restrictions:
  
  

• Cannot supply inter-state, while railways have zonal and pan-India operations.

• Cannot issue tax invoices with ITC, which may be required by the Railway Accounts Department.

• For railway contractors, input tax credit ineligible under Composition Scheme may raise cost of operations.

Railway Procurement Consideration:

• In tenders, preference is often given to regular GST registered suppliers who can pass ITC benefits to Indian Railways.

• Railways may not accept suppliers under composition schemes for certain categories where inter-state or exempt goods are involved.

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GSTIN – Goods and Services Tax Identification Number

 

GSTIN – Goods and Services Tax Identification Number

GSTIN is a 15-digit unique identification number allotted to every registered taxpayer under the Goods and Services Tax (GST) system in India. It helps in identifying businesses and ensuring transparency in tax compliance.

Each GSTIN is structured as follows: Format Example: 29ABCDE1234F1Z5

Segment	Digits	Description
State Code	1–2	First two digits represent the state code (e.g., 27 for Maharashtra, 29 for Karnataka).
PAN Number	3–12	Next ten digits are the Permanent Account Number (PAN) of the taxpayer.
Entity Number	13	Thirteenth digit identifies the number of registrations on the same PAN in a state.
Default Alphabet	14	Usually 'Z', reserved for future use.
Check Code	15	Alphanumeric digit for error detection/validation.

Example Explanation: GSTIN: 29ABCDE1234F1Z5

• 29 – Karnataka (State Code)

• ABCDE1234F – PAN of the business 

• 1 – First registration of this PAN in Karnataka

• Z – Default value

• 5 – Checksum digit 

GST and Indian Railways

GST Rates on Indian Railways Related Goods and Services 

(as of March 28, 2025)

Category	Description	GST Rate
Passenger Transportation	Non AC - Sleeper Class & General Class	0%
Exempt Services	Platform tickets, retiring rooms, cloakrooms, battery car services, Transportation of Railway equipment or materials by Goods Train	0%
Passenger Transportation	First Class (Non AC) or AC coaches like 1st AC, 2nd AC, 3rd AC, and AC Chair Car.	5%
Goods Transportation	Transportation of goods by rail	5%
Food & Beverages	Supplied by Indian Railways/IRCTC/licensees on trains	5%  (No ITC)
Works Contract Services (Reduced)	Earthwork contracts >75% of value	12%
Works Contract Services (Standard)	Construction of under-bridges, tunnels etc.	18%