Service Charge HSN Code – A Complete Guide

If you’re running a business, especially in India, you’ve probably heard of the term “HSN code.” And if you’re offering services and collecting a service charge, it’s important to understand what HSN code for service charge means. This blog will explain everything in simple words so that even if you’re not from an accounting background, you can still understand it easily.

---

HSN Code for Service Charge

Many people search for “HSN Code for service charge”, but this is technically incorrect. HSN codes are only for goods, not services. When you’re charging for a service—like consultancy, hotel stays, food services, or digital marketing—you should be using SAC codes instead.

The confusion arises because both HSN and SAC are used under GST, and many assume they’re the same. But here’s a simple rule:

✅ Use HSN Code for Goods
✅ Use SAC Code for Services (including service charges)

So, when someone asks for the “HSN code for service charge,” they’re actually looking for the SAC code that applies to the main service they’re providing. There is no separate SAC or HSN code just for “service charge.” The code is based on the type of service being offered.

For example:

• If you run a restaurant and add a service charge, the SAC code is under 9963 (Food & Beverage services).
• If you are a consultant adding a service charge, use SAC 9983 (Business & Professional services).

What is HSN Code?

HSN stands for Harmonized System of Nomenclature. It’s a system developed by the World Customs Organization (WCO) to classify goods in a uniform way across the world. It helps in easy identification of goods during import and export.

India uses HSN codes for goods and SAC (Service Accounting Codes) for services. Both are used under the Goods and Services Tax (GST) system.

---

What is a Service Charge?

A service charge is an amount added to a customer’s bill for the services provided. It is common in industries like hospitality, restaurants, travel, and consultancy. For example, if you go to a restaurant and see 10% extra on your bill as a service charge, that’s the business charging you for the services they provided.

This service charge is different from taxes. While GST is a government-imposed tax, a service charge is a business’s own decision.

---

Why Do We Need an HSN or SAC Code for Service Charge?

Under GST in India, every supply of goods or services must be reported using a specific HSN or SAC code. This helps in:

• Making the tax system uniform
• Ensuring clarity for buyers and sellers
• Helping the government track and manage tax collection

When you charge for a service, like a service charge, you must use the right SAC code in your GST invoices and returns.

---

HSN Code vs SAC Code

Let’s understand the basic difference between HSN and SAC codes.

Type	Used For	Full Form	Number of Digits
HSN Code	Goods	Harmonized System of Nomenclature	4, 6 or 8
SAC Code	Services	Service Accounting Code	6

For service charges, since they are related to services, we use SAC codes, not HSN codes. Still, many people search for “Service Charge HSN Code,” but what they actually need is the SAC code for service charge.

---

What is the SAC Code for Service Charge?

There is no single SAC code called “service charge” because the code depends on the type of service you are providing. Service charge is not a service itself; it is a fee for the actual service given.

For example:

• If a restaurant is charging a service charge, the SAC code falls under 9963 – Accommodation, food and beverage services.
• If a hotel adds a service charge, the SAC code is also under 9963.
• For consultancy services with a service charge, the SAC code could be 9983 – Other professional, technical and business services.

So, the SAC code depends on the main service that is being charged, not the service charge separately.

---

Examples of SAC Codes for Different Services

Industry	Type of Service	SAC Code	Service Charge Included In
Restaurants	Food & Beverage	996331	Total bill including service charge
Hotels	Accommodation	996311	Total bill including service charge
Consultancy	Business Services	998312	Total invoice amount
Event Planner	Event Management	998596	Final service charge
Advertising	Ad Services	998361	Total service invoice

In all these cases, the service charge is part of the main service, and the SAC code belongs to that main service.

---

How is GST Calculated on Service Charge?

When you raise an invoice that includes a service charge, GST is calculated on the total amount – including the service charge.

For example:

If the bill is ₹1000 and you add a 10% service charge (₹100), the total becomes ₹1100. GST will be charged on ₹1100, not just ₹1000.

This is important to note because many small businesses forget to include the service charge while calculating GST, which can cause issues during audits.

---

Is Service Charge Mandatory?

No, service charge is not mandatory under Indian law. Businesses are free to decide whether they want to charge it. However, if they do add it, they must:

• Inform customers in advance
• Mention it clearly on the bill or invoice
• Charge applicable GST if registered under GST

There have been cases in restaurants where customers were not informed about the service charge, leading to complaints. The Department of Consumer Affairs in India has clarified that service charges should be voluntary and transparent.

You can check Consumer Protection laws to understand more about customer rights in this area.

---

How to Show Service Charge in Invoice?

If you’re creating an invoice for a customer and adding a service charge, it should be shown like this:

Service: Business Consultation          ₹1000  
Service Charge @10%                    ₹100  
Subtotal                               ₹1100  
GST @18%                               ₹198  
Total Amount Payable                   ₹1298

Make sure to mention your GSTIN and SAC code related to the service.

---

GST Returns and Service Charge Reporting

When you file your GST returns, make sure that:

• The total amount (including service charge) is included
• The SAC code is correctly used
• You keep invoices with proper breakup for future reference

Incorrect reporting can lead to fines or penalties.

---

Common Mistakes to Avoid

• Using HSN code instead of SAC code for services
• Not including service charge in GST calculation
• Not informing customers about the service charge in advance
• Charging a service charge on items where it’s not applicable (like MRP products)

---

Conclusion

To wrap it up, there’s no separate HSN code for service charge, because HSN is for goods, and service charge applies to services. For that, you should use the right SAC code based on your business type. Always remember that service charge is part of the main service you provide, and GST should be charged on the full amount.

Being clear about this helps in correct invoicing, better tax compliance, and building trust with customers. If you’re not sure which SAC code to use, consult a GST expert or a chartered accountant.

For more background on the GST system, you can also check Wikipedia’s GST article.

---

Helpful Tips

• Use the SAC code of the main service, not a separate one for service charge.
• Keep your billing system updated with GST and SAC codes.
• Always show the service charge separately in the bill.
• Charge GST on the full amount including service charge.

---

Need help finding your correct SAC code? You can use the GST portal’s search tool or ask your tax consultant for accurate coding.

Also Read:

• HSN Code For Ms Pipe
• A Guide to HSN Codes for Support Services
• HSN Code for Installation Charges
• What is the SAC Code?
• HSN Code for Financial Services

Frequently Asked Question