HSN & SAC Code GST Rate Changes – Old vs New Rate (2025-26)

Items where GST rate was reduced:

• ▸Namkeen, bhujia, savoury snacks: 18% → 12%
• ▸Packaged water containers (>20 litres): 18% → 5%
• ▸Exercise books and notebooks: 12% → Nil
• ▸LED lamps, lights and fixtures: 18% → 12%
• ▸Bicycle parts (for cycles ≤₹10,000): 12% → 5%
• ▸Railway locomotive and wagon parts: 12% → 5%
• ▸Hotel rooms (tariff <₹1,000/night): 12% → Nil
• ▸Affordable housing construction (builder rate): 8% → 1%
• ▸Other residential (under construction): 12% → 5%

Items where GST rate was increased or newly made taxable:

• ▸Pre-packed/labelled rice, wheat flour, pulses, curd, honey: Nil → 5% (from 18.07.2022)
• ▸Online gaming — real money (rummy, poker, fantasy sports): 18% on GGR → 28% on full face value (from 01.10.2023)
• ▸Renting residential property to GST-registered person: Nil → 18% under Reverse Charge (from 18.07.2022)

Newly exempted items:

• ▸Exercise books and notebooks: 12% → Nil
• ▸Sanitary napkins and diapers: 12% → Nil (since 2018)
• ▸Hotel rooms with tariff below ₹1,000/night: 12% → Nil
• ▸Unbranded loose food items sold without label

Manufacturers:

Rate changes on raw materials directly affect input costs and ITC calculations. When input GST rates are reduced, the inverted duty structure refund claims may also reduce. Manufacturers must update their Bill of Materials (BOM) in ERP systems with the revised GST rates effective from the notification date. Rate changes on finished goods affect pricing strategies and dealer margins.

Traders (Wholesalers and Retailers):

Traders holding stock at the time of a rate change must issue credit notes for excess GST collected after a rate reduction. POS billing software must be updated before the effective date — not after. A retailer caught charging old (higher) rates must deposit the excess with the government without any recourse to the buyer.

Importers:

IGST on imports is calculated on (CIF Value + Landing Charges + Basic Customs Duty). HSN-based GST rate changes directly affect landed cost calculations. Rate changes in goods like electronics, food, and machinery affect import cost and pricing decisions. Importers must inform their Customs House Agents (CHAs) immediately about rate changes and verify correct HSN on Bills of Entry.

Exporters:

Most goods and services exports are zero-rated under GST. However, input rate changes affect ITC refund quantum. Exporters must maintain a valid LUT (Letter of Undertaking) each financial year and ensure export shipping bills carry correct 8-digit HSN codes. Rate changes on freight, insurance, and packing materials affect ITC refund eligibility and amount.

E-commerce Sellers (Amazon, Flipkart, Meesho):

From January 1, 2022, food delivery ECOs (Zomato, Swiggy) collect and remit 5% GST on restaurant services — the restaurant no longer collects it. Textile sellers must classify garments correctly (≤₹1,000 at 5%; >₹1,000 at 12%). All e-commerce sellers must reconcile GSTR-8 TCS data from the ECO with their own GSTR-1 filings monthly.

Pharmaceutical Industry:

Most life-saving drugs remain at 5% concessional rate. Diagnostic reagents and medical devices are at 12%. Pharmaceutical businesses must verify drug-wise HSN codes carefully, as scheduled vs. non-scheduled drug classifications carry different rates. COVID-era concessions have mostly been normalised.

Food Industry (FSSAI-licensed Businesses):

The July 2022 changes significantly impacted food businesses. Pre-packed and labelled staples (rice, flour, pulses, curd, honey) now attract 5% GST. Namkeen and savoury snacks saw a reduction from 18% to 12%. Restaurants remain at 5% with no ITC. Food businesses above ₹5 crore turnover must comply with e-invoicing requirements on all B2B supplies.

Textile Industry:

Readymade garments are taxed at 5% (MRP ≤₹1,000) or 12% (MRP >₹1,000). Job work for textiles is at 5% (for registered recipients) or 12% (for unregistered). Many textile inputs face an inverted duty structure — businesses should file for GST refund where input tax rate exceeds output tax rate on the final product.

IT Companies and Software Firms:

Software development, cloud services (SaaS, PaaS), and IT consulting remain at 18% (unchanged). IT companies exporting services must file under LUT for zero-rating or pay IGST and claim refund. SAC 998314 covers IT design and development; SAC 998315 covers IT support and maintenance services.

Consultants (CA, CS, Lawyers, Architects):

All professional services remain at 18% under SAC 9983. Legal services to government bodies may be under RCM in specified cases. Chartered accountants and company secretaries must issue proper GST invoices with SAC codes on every service bill — failure to do so is a compliance violation attracting penalty under Section 122.

Startups:

Startups must register for GST when annual turnover crosses ₹20 lakh (services) or ₹40 lakh (goods). The Composition Scheme is available for turnovers up to ₹1.5 crore. Startups receiving international payments for digital services must correctly apply zero-rating rules for export of services and maintain Foreign Inward Remittance Certificates (FIRCs/BRCs) as proof.

MSMEs:

MSMEs with turnover above ₹5 crore in any previous financial year must now generate e-invoices. Rate changes on commonly used MSME goods (tools, spare parts, packaging) directly affect input costs. MSMEs exporting goods can use LUT to export without paying IGST and claim accumulated ITC as refund. Composition scheme taxpayers must file GSTR-4 annually by April 30.

Step 1 — Identify all affected goods or services:

• ▸Download official CBIC notification from cbic.gov.in
• ▸List all HSN/SAC codes in your product/service catalogue
• ▸Match each code against the notification and note the effective date
• ▸Remember: effective date is in the notification, not the council meeting date

Step 2 — Update all billing and accounting systems:

• ▸Change GST rate in ERP tax master for affected HSN/SAC codes
• ▸Update POS/billing software with new rates before the effective date
• ▸Set old rate up to effective date minus one day; new rate from effective date
• ▸Update e-invoicing system integrated with IRP portal
• ▸Generate a test invoice to verify before going live

Step 3 — Handle stock at the rate change date:

• ▸Document your stock position on the day of rate change
• ▸For rate reductions — issue credit notes for invoices raised at old higher rate after effective date
• ▸For rate increases — ensure invoices before effective date carry old (lower) rate
• ▸Adjust ITC calculations for stock-in-transit if applicable

Step 4 — Train your team and verify GST returns:

• ▸Brief accounts team on new rates and their effective dates
• ▸Train billing staff to verify item category before invoicing
• ▸Ensure GSTR-1 HSN/SAC summary reflects correct rates post-change
• ▸Reconcile GSTR-3B liability with revised rate structure
• ▸Consult a GST professional if any classification is disputed

Mistake 1 — Using incorrect or outdated HSN code:

Many businesses use 4-digit HSN codes even when 6 digits are mandatory (turnover >₹5 crore), or use codes from old tariff schedules. This causes GSTR-1 filing errors, ITC mismatch for buyers, and scrutiny notices from GST officers. Penalty under Section 125: up to ₹25,000 per instance.

Mistake 2 — Charging old GST rate after a rate change:

The most common and costly mistake. If you charge 18% when the new rate is 12%, you must deposit 18% — the buyer can only claim 12% ITC. The 6% excess is an avoidable loss. If you charge 12% when the new rate is 18%, you bear the 6% shortfall from your own pocket with additional interest at 18% p.a.

Mistake 3 — Misclassifying goods as services or vice versa:

IT software on a DVD/USB is a good (HSN 8523). The same software as a cloud subscription is a service (SAC 9983). While the rate may be similar, place of supply rules differ — determining whether CGST+SGST or IGST applies and which state government receives the tax.

Mistake 4 — Not paying GST under Reverse Charge Mechanism (RCM):

Businesses receiving services from unregistered vendors (GTA transport, legal services, security) must pay GST under RCM. Not paying RCM attracts interest at 18% p.a. from the due date. RCM liability must be calculated and paid monthly before GSTR-3B is filed for that period.

Mistake 5 — Claiming ITC on blocked credits or exempt supplies:

GST paid on motor vehicles (non-specified purposes), food & beverages, club memberships, and personal use cannot be claimed as ITC under Section 17(5). Wrongly claimed ITC results in demand with 18% interest and a penalty of up to 100% of the incorrectly claimed amount.

Mistake 6 — Missing e-invoice for eligible B2B transactions:

Businesses above ₹5 crore turnover must generate e-invoices for all B2B transactions. Missing e-invoices means those supplies are not auto-populated in the buyer's GSTR-2B, causing ITC disputes. CBIC can impose penalties under Section 122 for non-issuance of e-invoices.

Q1. How do I find the correct HSN Code for my product?

Visit the CBIC GST Rate Finder at gst.gov.in (Services → GST Rate Finder) or the CBIC website at cbic.gov.in. You can also refer to the First Schedule to the Customs Tariff Act, 1975, which contains the complete 8-digit HSN structure. For complex products, consult a GST professional to ensure correct classification.

Q2. How do I find the correct SAC Code for my service?

SAC codes are listed in the Annexure to Notification No. 11/2017-Central Tax (Rate) dated June 28, 2017 (as amended). The GST portal also has a search tool. For multi-component or bundled services, the SAC of the predominant supply determines the composite supply rate. A GST consultant can help with complex classifications.

Q3. What happens if I use the wrong HSN code on invoices?

Consequences include: (a) GST return errors and mismatch scrutiny notices from the department, (b) ITC denial to your buyers if their GSTR-2B shows an incorrect code, (c) Penalty of up to ₹25,000 per invoice under Section 125 of CGST Act, (d) Demand for differential tax if the wrong code carried a lower GST rate.

Q4. Are HSN codes mandatory on all GST invoices?

From April 1, 2021: Businesses up to ₹5 crore must mention 4-digit HSN on B2B invoices (optional on B2C). Businesses above ₹5 crore must mention 6-digit HSN on all invoices. Exporters must always use 8-digit HSN codes on shipping bills and export invoices. E-invoicing mandates minimum 6-digit HSN regardless of B2B/B2C.

Q5. From what date do GST rate changes apply?

GST rate changes apply from the date specified in the official CBIC Gazette notification — not from the GST Council meeting date. The meeting date and effective date often differ. For example, if the notification is dated July 13, 2022 with an effective date of July 18, 2022, old rates apply up to July 17 and new rates from July 18 onwards.

Q6. Where can I verify the latest official GST rates?

Always use primary government sources: cbic.gov.in (complete notification archive), gst.gov.in (GST Rate Finder), and indiacode.nic.in (consolidated Acts). Never rely solely on news articles or secondary tax websites — they may not reflect the latest amendments. When in doubt, read the gazette notification directly.

Q7. What is the GST rate on pre-packed food items like rice and wheat flour?

From July 18, 2022, pre-packed and labelled rice, wheat flour, atta, maida, pulses, curd, lassi, buttermilk, and honey attract 5% GST. Loose or unbranded food items sold without a label or pre-packaging remain exempt (Nil GST). The key distinction is "pre-packed and labelled for retail sale" vs. loose bulk supply.

Q8. What is the GST rate on hotel accommodation?

Hotel accommodation GST (SAC 9963): Rooms below ₹1,000 per night — Nil (exempt since July 18, 2022). Rooms ₹1,001 to ₹7,500 per night — 12% GST. Rooms above ₹7,500 per night — 18% GST. Restaurant services in standalone restaurants (AC or non-AC) — 5% with no ITC. Restaurant in 5-star hotel — 18% with ITC.

Q9. What is the GST rate on online gaming after October 2023?

From October 1, 2023, real money online gaming (rummy, poker, fantasy sports, casino games) attracts 28% GST on the full face value of bets deposited — not just the platform fee or GGR (Gross Gaming Revenue). This was a significant change from the earlier 18% on GGR. Non-real-money skill games without monetary stakes remain at 18%.

Q10. Is GST applicable on residential property rent?

Renting a residential property to an individual for personal use — Nil GST (still exempt). Renting a residential property to a GST-registered person (company or registered individual using it for business) — 18% GST under Reverse Charge Mechanism (RCM), effective July 18, 2022. The registered tenant pays this GST and can claim ITC if the property is used for business.

Q11. What is the GST rate on under-construction property?

Affordable housing (area ≤60 sq.m. in metro, ≤90 sq.m. elsewhere, price ≤₹45 lakh): 1% GST — no ITC for builder. Other residential property under construction: 5% GST — no ITC for builder. Ready-to-move property with Occupancy Certificate (OC): No GST (entirely exempt as immovable property sale). Commercial property under construction: 5% GST.

Q12. How does GST work for Zomato and Swiggy food deliveries?

From January 1, 2022, Electronic Commerce Operators (ECOs) like Zomato and Swiggy collect and deposit 5% GST on restaurant services ordered through their platform. The restaurant no longer collects GST on these orders. The ECO files GSTR-8 to account for this TCS-like collection. Restaurants must still declare these supplies in their GSTR-1.

Q13. What is the GST rate on readymade garments and textiles?

Readymade garments: 5% if MRP or value is ₹1,000 or less; 12% if MRP exceeds ₹1,000. Fabrics (cotton, silk, synthetic, wool) — generally 5%. Job work on textiles/garments for a registered person — 5%; for unregistered person — 12%. Man-made fibre and yarn — 12%.

Q14. Can I get a refund if I overpaid GST due to a rate change?

If you charged and deposited excess GST due to applying an old higher rate after a rate reduction, issue a credit note to the buyer and adjust the excess in your next GSTR-3B. A direct refund from the government is not available for excess tax collected and deposited — the correct process is credit note to buyer plus adjustment in the return.

Q15. What happens if I don't update GST rates in billing software on time?

For rate reductions: you overcharge buyers and must issue credit notes; you also risk the government demanding the reason for excess collection. For rate increases: you undercharge and must pay the differential tax from your own pocket plus 18% interest per annum from the due date of that month's GSTR-3B.

Q16. What is Reverse Charge Mechanism (RCM) and when does it apply?

Under RCM, the recipient (buyer) pays GST to the government — not the supplier. RCM applies to: services from unregistered suppliers above ₹5,000 in aggregate per day, Goods Transport Agency (GTA) services, legal services to business entities, and certain other specified supplies. RCM payers can generally claim ITC on the tax paid if the supply is used for business.

Q17. How do I correct an invoice with wrong HSN code already filed in GSTR-1?

If GSTR-1 for the period is not yet filed — correct the invoice before filing. If GSTR-1 is already filed — for B2B invoices, amend the invoice in Table 9A of the next month's GSTR-1. For B2C invoices — amend in Table 10. Inform the buyer to recheck their GSTR-2B for updated ITC. Document all amendments with business reason.

Q18. Is GST applicable on exports of goods and services?

All exports are zero-rated under Section 16 of the IGST Act. Exporters can either: (a) export under LUT (Letter of Undertaking) without paying IGST and claim refund of accumulated input ITC, OR (b) pay IGST on exports and claim a full refund of IGST paid. LUT must be filed on the GST portal before the first export of each financial year.

Q19. What are the penalties for wrong GST rates on invoices?

Penalties under CGST Act: Short payment of tax due to wrong rate — 10% of tax short-paid (minimum ₹10,000), or 100% of tax in fraud cases. Failure to issue proper tax invoice — up to ₹25,000. Incorrect invoice details — up to ₹25,000. Interest on delayed/short payment — 18% per annum from the due date.

Q20. How often are GST rates revised and how do I stay updated?

The GST Council meets 2–4 times per year. Not every meeting results in rate changes. Major rationalisation rounds were in July 2022 (47th meeting), January 2022 (textiles), October 2023 (online gaming), and April 2019 (real estate). Subscribe to CBIC notification emails at cbic.gov.in, or follow the official CBIC Twitter handle for real-time alerts on rate changes.