HSN/SAC for Insurance

HSN (Harmonised System of Nomenclature) and SAC (Services Accounting Code) are the classification codes used under the Goods and Services Tax (GST) regime in India to identify the goods or services being supplied on a tax invoice. Insurance, being a service, is classified under SAC codes within the broader Heading 9971 ('Financial and related services') and Heading 9954 / 9963 / 9971 sub-classes depending on the line of business. The principal SAC codes Indian policyholders encounter on their insurance invoices are: 997131 for life insurance services, 997132 for general insurance services (motor, fire, marine, personal accident), and 997133 for health insurance services.

Reinsurance services are classified separately. Each SAC corresponds to the GST rate applicable to that line — 18% on most retail insurance premium components, with a calibrated effective rate on the savings element of certain life insurance products as discussed under the GST-on-insurance-premium term. The SAC must be disclosed on the GST tax invoice that the insurer issues to the policyholder, and it is what enables the policyholder (if a registered business) to claim Input Tax Credit (ITC) where allowed.

Worked example: a small-business owner buys a ₹50 lakh shopkeeper package policy with an annual premium of ₹35,000. The insurer's tax invoice shows ₹35,000 as the taxable value, SAC 997132 (general insurance), CGST 9% = ₹3,150, SGST 9% = ₹3,150, total invoice value ₹41,300. Because the policy covers business assets, the business owner (if GST-registered) can claim ₹6,300 as ITC against output GST liability, effectively reducing the after-tax cost of insurance.

The same business owner buying a ₹15,000 personal health policy under SAC 997133 cannot claim ITC because health insurance for non-employee personal use is generally blocked under Section 17(5) of the CGST Act, except in specific cases such as when the insurance is mandatorily required under any law (notified categories). A common misconception is that all insurance premiums attract uniform GST treatment. They do not — life savings products, term plans, health, motor, and reinsurance each have nuanced effective rates, and the SAC code on the invoice signals which schedule applies.

Another common misconception is that ITC can be claimed on every business-bought insurance policy. The Section 17(5) restrictions block ITC on motor insurance for non-fleet personal vehicles, on life insurance where it is not statutorily mandated for the workforce, and on most health insurance covers other than those mandated under a notification. Verify ITC eligibility with a tax adviser before treating insurance premium as a fully creditable input.

Related: gst-on-insurance-premium, tds-on-insurance-payout, irdai.