What is the HSN/SAC code for packaging services?

Packaging services (non-industrial and contract packaging) are classified under SAC code **998540**.

What is the SAC code for freight forwarding and cargo handling?

Freight forwarding, cargo handling, and transportation support services are classified under SAC code **996719**.

How is GST charged on packing and forwarding charges in a product invoice?

Under GST, if packaging and forwarding charges are billed alongside goods in the same invoice, the transaction is treated as a **composite supply**. The packing charges attract the **same GST rate** as the principal good.

What is the difference between composite supply and mixed supply?

A composite supply consists of naturally bundled services (like a product and its protective packing), which are taxed at the principal item's rate. A mixed supply consists of independent items bundled together, which are taxed at the highest individual item rate.

How do you set up packing charges in Tally Prime?

Create an **Inward/Outward Packing Charges** ledger under Direct Expenses/Income, enable GST computation, and select **Apportion tax based on item value** to allocate taxes dynamically.

Packaging & Forwarding HSN/SAC Codes: GST Guide

GST Composite Supply Rules

Quick Answer: What is the Correct HSN/SAC Code for Packaging and Forwarding Charges?

Under GST composite supply rules (Section 8), packaging and forwarding charges charged on a goods invoice follow the HSN code and GST tax rate of the principal goods. When billed as an independent freight/handling service, SAC Code 9967 (Cargo Handling & Storage) applies at 18% GST.

Composite Supply (Section 8): If billed on product invoice, tax at the same rate as principal goods
Standalone Service: SAC 9967 (Supporting services in transport) taxed at standard 18% GST
Freight Handling: SAC 9965 (Goods transport services) if provided directly by transport agencies
Tally Setup: Add Packaging Charges ledger under Direct/Indirect Expenses with GST set to Applicable

Shipping physical goods to customers requires managing logistics costs, including packaging and freight forwarding. Under India's GST laws, classifying these expenses depends on whether they are billed independently or as part of a product delivery bundle.

Understanding HSN/SAC codes, composite supply rules, and accounting setups is essential to ensure compliance.

1. HSN and SAC Codes: The Backbone of GST Compliance

GST uses HSN codes for goods and SAC codes for services. Packaging and forwarding operations involve both: raw packaging materials (such as wooden boxes or bubble wrap) carry specific HSN codes, while the service of packing, loading, and forwarding carries a SAC code.

2. Understanding the Relevant Codes: Your HSN Code Toolbox

The SAC system classifies logistic support services using distinct codes:

SAC/HSN Code	Description	GST Rate
998540	Specialized packaging services (contract packing and labeling)	18% (Standalone services)
996719	Cargo handling, logistics, and freight forwarding support	18% (Standalone services)
996511	Road transport services for goods (GTA)	5% (Without ITC under RCM) / 12% (With ITC)
HSN 4819	Cartons, boxes, and packaging containers made of paper	18% (Supply of packaging material goods)

3. Why Getting the HSN Code Right Matters (Composite Supply Rules)

A common area of audit dispute is the tax treatment of packing and forwarding charges added to a sales invoice. If a manufacturer sells electric machinery (18% GST) and adds a separate line item for protective wooden packing charges, the entire invoice is treated as a **Composite Supply**.

Under Section 2(30) of the CGST Act, because packing and transportation are naturally bundled with the principal supply of goods, the packing charge line item must carry the **same 18% GST rate** as the machinery, rather than a different rate.

4. Case Study: Invoicing Machinery Sales with Packing Charges

A company sells an electric generator worth **₹1,00,000** (GST rate 18%) and adds packaging charges of **₹5,000** on the same invoice:

Principal Item Value: ₹1,00,000 (Taxed at 18%)
Packaging Cost: ₹5,000
Composite GST Applicability: The packaging charges (₹5,000) are taxed at 18% (the rate of the principal generator), resulting in a tax of ₹900.
Total Bill Value: ₹1,23,900
Taxable Value = ₹1,05,000 | GST = ₹1,05,000 * 18% = ₹18,900
Tally Accounting Entry: The accountant records the sales voucher, allocating the tax to CGST and SGST ledgers.

Entry: Composite Product Invoice Sales (F8 Sales)
Debit:  Sundry Debtors Account ₹1,23,900
Credit: Machinery Sales Ledger                 ₹1,00,000
Credit: Outward Packing Charges Ledger          ₹5,000
Credit: CGST Payable Ledger (9%)                 ₹9,450
Credit: SGST Payable Ledger (9%)                 ₹9,450

5. Setting Up Packing Charge Ledgers in Tally Prime

To manage shipping and packing charges natively in Tally:

Tally Packing Charges Ledger:

Go to **Gateway of Tally > Create > Ledger**. Create **Outward Packing Charges** under **Indirect Incomes**.

Set **Is GST Applicable** to **Not Applicable** (taxes are determined by the principal items), and select **Include in Assessable Value Calculation for GST** as **Yes**. Choose **GST** as the tax type and set the valuation method to **Based on Value**, ensuring correct tax splits on composite invoices.

Stop typing invoices manually into Tally: Skip the manual data entry. Just upload your purchase bill PDFs or images, review the extracted values, and sync them directly to Tally Prime in a few clicks with TrulyInvoice. Keep your books audit-ready without the typing.

Cracking The HSN Code For Packaging And Forwarding In India