Error compiling .scss file

I am trying to compile .scss files using this loader. I am getting the error below when I invoke webpack command:

Hash: 471ab211129c4252e031
Version: webpack 1.7.3
Time: 52ms
    + 1 hidden modules

ERROR in ./dummy.scss
Module parse failed: /home/chandu/www/sass-loader-test/node_modules/sass-loader/index.js!/home/chandu/www/sass-loader-test/dummy.scss Line 1: Unexpected token {
You may need an appropriate loader to handle this file type.
| body {
|   background-color: #fff; }
| 

I have created a repo to replicate the issue: https://github.com/Chandu/sass-loader-test

When I use node-sass directly I don’t get any error. You can try this running node test.js from the repo linked above.

chandu@nobuntu:~/www/sass-loader-test$ node test.js 
body {
  background-color: #fff; }

Am pretty sure I am doing something wrong, but not sure what it is. Can anyone help me with this?

[rpmonteiro]

Would be great if you guys could post a solution once you found it 👍

[ivanminutillo]

why. no one. shows. a solution with code. -_-