Product items are tangible goods. When you create a product item, Zoho Books requires an HSN code (Harmonised System of Nomenclature), which is an 8-digit code classifying the type of good. The GST rate is assigned at the HSN code level by the government. Inventory tracking can be enabled for product items: each time the item is added to a customer invoice, the stock decreases; each time it is added to a vendor bill or purchase order, the stock increases. The item’s stock balance is visible from the Items module and feeds into stock-on-hand reports.
Service items are intangible. They use SAC codes (Service Accounting Codes) instead of HSN codes. There is no inventory quantity to track, so adding a service item to an invoice simply records the income without affecting any stock balance. Service items are ideal for professional fees, subscription charges, maintenance contracts, training, and any other deliverable that is not a physical product. Both product and service items support GST rate assignment and all standard pricing and discount features.
Many Indian businesses raise invoices that mix product and service items. For example, a printer supplier sells a printer (product, HSN code) and charges for installation (service, SAC code) on the same invoice. Zoho Books handles this correctly: each line item carries its own HSN or SAC code and GST rate, and the invoice totals the different tax amounts before calculating the grand total.
A product item in Zoho Books represents a physical good tracked in inventory with an HSN code. A service item represents an intangible service with a SAC code and no stock tracking.
Use a service item for any intangible deliverable such as consulting, software development, maintenance contracts, or installation services. Service items use SAC codes and are never tracked in inventory.
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