Understanding HSN & SAC Codes: What Every Indian Salon Owner Needs to Know for Hassle-Free GST Compliance

I'll never forget the panic in Priya's voice when she called me at 9 PM on a Tuesday. She'd just received a GST notice for her beauty parlour in Pune, and the tax officer was questioning her service classifications. "I thought I was doing everything right," she said, her voice shaking. "I've been using random codes for my services, and now they're saying I owe penalties."

That conversation happened three years ago, but it perfectly captures the confusion most salon owners face with HSN and SAC codes. You're running a business, managing clients, handling staff – and then there's this maze of tax codes that seems designed to trip you up. Here's the thing: it doesn't have to be this complicated. Once you understand the basics, GST compliance becomes just another routine part of your business operations.

By the end of this guide, you'll know exactly which codes to use for every service in your salon, spa, or beauty clinic, how to stay compliant without the headaches, and – most importantly – how to avoid those dreaded tax notices that keep business owners awake at night.

What exactly are HSN & SAC Codes and why should every salon owner care?

HSN and SAC codes are basically the government's way of categorizing everything for tax purposes. HSN (Harmonized System of Nomenclature) codes are for goods – think your hair products, cosmetics, and equipment. SAC (Services Accounting Codes) are for services – your haircuts, facials, massages, and treatments.

Here's why this matters for your business: every invoice you generate, every GST return you file, needs the correct code. Get it wrong, and you're looking at penalties, interest charges, and unnecessary stress. Get it right, and GST compliance becomes almost automatic.

The beauty industry has seen some major changes recently. As of September 22, 2025, the GST Council reduced rates for beauty and wellness services from 18% to just 5% – a game-changer for salon owners. But here's the catch: you need to use the right codes to benefit from these reduced rates.

How does GST classification actually work in practice for beauty businesses?

Let me walk you through how this works in the real world. When Rajesh runs his unisex salon in Bangalore, every service he provides falls under a specific SAC code:

When he cuts someone's hair:SAC 999721 (Hairdressing services) at 5% GST
When his staff does a manicure:SAC 999722 (Cosmetic treatment services) at 5% GST
When they provide facial treatments:SAC 999729 (Other beauty services) at 5% GST

For products he sells – shampoos, conditioners, styling gels – those use HSN codes:

Hair care products:HSN 3305 at 18% GST
Cosmetics and makeup:HSN 3304 at 18% GST
Perfumes and fragrances:HSN 3303 at 18% GST

The system actually makes sense once you see the pattern. Services get SAC codes (usually starting with 99), goods get HSN codes (typically 4-8 digits), and each comes with its own GST rate.

What are the main benefits and potential pitfalls of proper code usage?

The benefits are huge:

Reduced tax rates : With the new 5% rate on beauty services, you're saving 13% compared to the old rates
Input Tax Credit : You can claim back GST paid on business purchases when your codes are correct
Compliance confidence : No more worrying about tax notices or penalties
Professional credibility : Proper invoicing builds trust with clients
Better financial tracking : Accurate codes help you understand your business better

But there are real risks if you get it wrong:

Penalty charges of up to 100% of the tax amount
Interest on unpaid taxes (currently 18% annually)
Increased scrutiny from tax authorities
Loss of Input Tax Credit benefits
Potential business disruption during audits

I've seen salon owners lose thousands because they used wrong codes for months before catching the mistake. The good news? Once you set up your system correctly, it runs smoothly.

When should you use specific codes for different beauty business types?

This is where it gets practical. Different types of beauty businesses need different approaches:

Traditional Hair Salons:

Hair cutting, styling, coloring:SAC 999721
Hair treatments (keratin, smoothening):SAC 999721
Hair spa services:SAC 999729

Beauty Parlours:

Facial treatments:SAC 999729
Eyebrow threading/shaping:SAC 999729
Makeup services:SAC 999729
Manicure/pedicure:SAC 999722

Full-Service Spas:

Body massages:SAC 999729
Body treatments/wraps:SAC 999729
Wellness therapies:SAC 999729
Sauna/steam services:SAC 999729

Specialized Services:

Nail extensions/art:SAC 999722
Permanent makeup/microblading:SAC 999722
Tattoo services:SAC 999729
Laser hair removal:SAC 999722
Botox/fillers (medical spas):SAC 999722

Barber Shops:

Hair cutting:SAC 999721
Beard trimming/shaping:SAC 999721
Head massage:SAC 999721

The key is consistency. Once you decide on codes for your services, stick with them across all invoices and returns.

What mistakes should you absolutely avoid with GST codes?

Based on my experience helping hundreds of salon owners, here are the biggest mistakes I see:

Using HSN codes for services : I can't tell you how many times I've seen salon owners use HSN codes for haircuts or facials. Services always get SAC codes, products get HSN codes. Always.

Mixing up similar codes : SAC 999721 is specifically for hairdressing, while 999729 is for other beauty treatments. Using 999721 for everything beauty-related is wrong and can trigger audits.

Ignoring the new rates : Some salon owners are still charging 18% GST instead of the new 5% rate. You're overcharging clients and potentially creating compliance issues.

Inconsistent code usage : Using different codes for the same service across different invoices confuses the system and raises red flags.

Not updating billing software : If your salon management software isn't updated with current codes and rates, you're setting yourself up for problems.

Forgetting about retail sales : When you sell products, those need HSN codes and different GST rates than your services.

Let me share what happened to Meera, who runs a beauty clinic in Mumbai. She was using SAC 999721 for everything – haircuts, facials, manicures. During a routine check, the tax officer noticed the inconsistency. She ended up paying ₹45,000 in penalties and spent weeks sorting out her records. A simple mistake that cost her dearly.

Complete SAC Code Breakdown for Every Beauty Business Type

Let me give you the comprehensive breakdown that I wish someone had given me when I started working with salon owners:

Hair Services (SAC 999721) - 5% GST

Hair cutting and styling
Hair coloring and highlighting
Hair straightening and curling
Hair treatments (keratin, protein treatments)
Blow-drying and setting
Hair extensions application
Scalp treatments
Hair consultation services

Cosmetic Treatments (SAC 999722) - 5% GST

Manicure and pedicure services
Nail art and extensions
Permanent makeup and microblading
Eyelash extensions and tinting
Eyebrow shaping and tinting
Cosmetic injections (Botox, fillers)
Laser hair removal
Chemical peels
Cosmetic surgery procedures

Other Beauty & Wellness Services (SAC 999729) - 5% GST

Facial treatments (all types)
Body massages and therapies
Body wraps and treatments
Spa services (sauna, steam, jacuzzi)
Aromatherapy sessions
Reflexology
Skin analysis and consultation
Waxing services
Threading services
Tattoo and piercing services
Wellness coaching

HSN Codes for Beauty Products You Sell

When you retail products in your salon, you need these HSN codes:

Hair Care Products (HSN 3305) - 18% GST

Shampoos and conditioners
Hair oils and serums
Styling gels and mousses
Hair sprays and waxes
Hair masks and treatments

Cosmetics (HSN 3304) - 18% GST

Makeup products (foundation, lipstick, etc.)
Skincare creams and lotions
Sunscreen products
Anti-aging products

Perfumes & Fragrances (HSN 3303) - 18% GST

Perfumes and eau de toilette
Deodorants and body sprays
Essential oils for aromatherapy

Professional Equipment (Various HSN Codes) - 18% GST

Hair dryers and styling tools: HSN 8516
Massage equipment: HSN 9019
Salon furniture: HSN 9401
Sterilization equipment: HSN 8419

GST Registration Requirements: Do You Need It?

Here's what you need to know about GST registration for your beauty business:

Mandatory Registration:

Annual turnover exceeds ₹40 lakhs (₹20 lakhs in northeastern states)
Providing services across state borders
E-commerce marketplace sales

Optional Registration:

Turnover between ₹20-40 lakhs (₹10-20 lakhs in NE states)
Want to claim Input Tax Credit on purchases
Building business credibility

Composition Scheme Option:

If your turnover is between ₹50 lakhs and ₹1.5 crores, you can opt for the composition scheme:

Pay 6% GST on services (no input tax credit)
Simplified compliance
Quarterly returns instead of monthly

Honestly, most salon owners I work with benefit from GST registration even when it's optional. The Input Tax Credit alone often makes it worthwhile.

Setting Up Your Billing System for Perfect Compliance

This is where the rubber meets the road. Your billing system needs to handle codes automatically, or you'll make mistakes. Here's what works:

Essential Features Your System Needs:

Automatic SAC/HSN code assignment by service/product
Updated GST rates (especially the new 5% rates)
Proper invoice formatting with all required details
Integration with GST returns filing
Client-wise service history tracking

Invoice Must-Haves:

Your GSTIN number
Client's GSTIN (if they have one)
Correct SAC/HSN codes for each service/product
HSN/SAC-wise totals
Proper tax calculations
Sequential invoice numbering

I remember when Arjun upgraded his salon's billing system to handle GST properly. Within the first month, he discovered he'd been losing ₹8,000 monthly in unclaimed Input Tax Credit just because his old system couldn't track purchases properly.

Input Tax Credit: Your Hidden Profit Booster

Here's something many salon owners miss: Input Tax Credit (ITC) can significantly boost your profits. You can claim back GST paid on:

Business Purchases Eligible for ITC:

Professional hair and beauty products used in services
Salon equipment and furniture
Interior decoration and renovation
Professional training and certification courses
Business insurance premiums
Rent (if GST is charged)
Advertising and marketing expenses
Professional services (CA, lawyer fees)

What You Can't Claim:

Personal expenses
Entertainment costs
Gifts and donations
Food and beverages for staff

The Math That Matters:

Let's say you spend ₹50,000 monthly on products and services with 18% GST. That's ₹9,000 in GST you can claim back. Over a year, that's ₹1,08,000 back in your pocket – just for maintaining proper records and filing correctly.

Common Scenarios and Their Correct Code Usage

Let me walk you through some real scenarios I encounter regularly:

Scenario 1: Bridal Package Services

Hair styling and makeup: SAC 999721 (hair) + 999729 (makeup)
Manicure/pedicure: SAC 999722
Draping service: SAC 999729

Total GST: 5% on all services

Scenario 2: Men's Grooming Salon

Haircut and styling: SAC 999721
Beard grooming: SAC 999721
Facial treatment: SAC 999729
Head massage: SAC 999721

All at 5% GST

Scenario 3: Medical Spa Services

Laser treatments: SAC 999722
Chemical peels: SAC 999722
Consultation: SAC 999729
Follow-up care: SAC 999722

All at 5% GST

Scenario 4: Product Sales

Retail shampoo: HSN 3305 at 18%
Professional hair color (for service): HSN 3305 at 18% (claim ITC)
Makeup products: HSN 3304 at 18%

Staying Updated: GST Changes and Your Business

The beauty industry has seen significant changes, and more might be coming. Here's how to stay ahead:

Recent Changes (September 2025):

Beauty services GST reduced from 18% to 5%
Simplified compliance for small businesses
Enhanced digital filing requirements

What's Coming:

Possible further rate rationalization
Increased digitization requirements
Stricter compliance monitoring

Staying Informed:

Subscribe to GST Council updates
Join beauty industry associations
Work with a qualified CA who understands beauty businesses
Use updated salon management software

I always tell salon owners: GST compliance isn't a one-time setup. It's an ongoing process that needs attention as your business grows and regulations evolve.

Technology Solutions That Make Compliance Effortless

Let's be practical about this. Manual GST compliance is a recipe for errors and stress. The right technology makes everything smoother:

What to Look for in Salon Software:

Automatic GST calculations with updated rates
Service-wise SAC code mapping
Product inventory with HSN codes
GST return preparation
Client GST details management
Comprehensive reporting

Integration Benefits:

When your appointment booking, billing, inventory, and accounting systems work together, compliance becomes automatic. Every service booked gets the right code, every product sold is tracked properly, and your GST returns practically file themselves.

For salon owners usingcomprehensive salon management systems , GST compliance becomes just another automated background process. The software handles code assignments, rate calculations, and even helps prepare your returns – leaving you free to focus on what you do best: making clients look and feel amazing.

Record Keeping: Your Compliance Safety Net

Good records aren't just about compliance – they're about understanding your business. Here's what you absolutely must maintain:

Essential Records:

All purchase invoices with proper HSN codes
Service invoices with correct SAC codes
Bank statements and payment receipts
GST return acknowledgments
Input tax credit calculations
Client information and GSTIN details

Digital Best Practices:

Cloud backup of all records
Regular data exports
Proper file naming conventions
Access control for sensitive data
Regular system backups

Retention Period:

Keep all GST-related records for at least 6 years from the due date of filing the annual return. Trust me, you don't want to be scrambling for old records during an audit.

Frequently Asked Questions

What's the difference between HSN and SAC codes for salons?

HSN codes are for goods (products you sell), while SAC codes are for services (treatments you provide). Services use SAC codes starting with 99, products use 4-8 digit HSN codes.

Do I need different codes for different types of haircuts?

No, all hairdressing services use SAC 999721 regardless of the specific style or technique. The code covers cutting, styling, coloring, and treatments.

Can I use the same invoice for both services and product sales?

Yes, but you must separate them clearly with appropriate SAC codes for services and HSN codes for products, each with their correct GST rates.

What happens if I've been using wrong codes for months?

You can file revised returns for up to 2 years. It's better to correct mistakes voluntarily than wait for the tax department to find them during audits.

How do I handle package deals with multiple services?

Break down packages by service type, apply appropriate SAC codes, and calculate GST accordingly. Don't use a single generic code for mixed services.

Is the 5% GST rate applicable to all beauty services?

Yes, as of September 2025, most beauty and wellness services attract 5% GST, but product sales still carry 18% GST.

Do I need GST registration for a small neighborhood salon?

Only if your annual turnover exceeds ₹40 lakhs, but voluntary registration can help you claim input tax credit and appear more professional.

Can I claim GST on products I use for client services?

Yes, professional products used in services qualify for input tax credit, helping reduce your overall tax burden.

How often do GST rates change for beauty services?

Changes are infrequent but significant. The recent reduction from 18% to 5% was the first major change in several years.

What's the penalty for using incorrect SAC codes?

Penalties can be up to 100% of the tax difference, plus interest. It's always better to use correct codes from the start.

Final Thoughts: Making GST Work for Your Beauty Business

Here's what I've learned after helping hundreds of salon owners navigate GST compliance: it's not about memorizing every code or becoming a tax expert. It's about setting up simple, reliable systems that handle the complexity for you.

The beauty industry in India is booming, and proper GST compliance isn't just about avoiding penalties – it's about building a professional, scalable business that can grow without regulatory headaches. The recent rate reductions show the government recognizes the importance of our industry, but only businesses that maintain proper compliance will fully benefit from these changes.

Whether you're running a single-chair salon in a small town or a multi-location spa chain in a metro city, the principles remain the same: use the right codes, maintain proper records, and leverage technology to automate compliance wherever possible.

Remember Priya from my opening story? After we sorted out her GST issues and set up proper systems, she hasn't had a single compliance problem in three years. Her business has grown 40%, and she's opened a second location. That's the power of getting the basics right.

Your clients trust you to make them look and feel their best. With proper GST compliance, you can focus entirely on that mission, knowing your business foundation is solid and your growth isn't limited by regulatory concerns.

The beauty business is about transformation – and proper GST compliance is just another tool to transform your business from good to exceptional.