Understanding Service Accounting Codes (SAC) in India's GST Regime
Service Accounting Codes (SAC) are a crucial classification system for services under India's GST framework, working alongside HSN codes for goods. These six-digit codes, derived from the UNCPC system and adapted by the CBIC, help categorize services, determine applicable GST rates, and ensure compliance. Businesses must use SAC codes on invoices and in GST returns, with specific digit requirements based on turnover and transaction type. Their implementation allows the government to track GST collections from various service sectors efficiently.
When the Goods and Services Tax (GST) was first introduced, the Central Board of Indirect Tax and Customs (CBIC) established the Harmonized System of Nomenclature (HSN) and Service Accounting Code (SAC) systems to streamline the categorization of goods and services. This article provides a thorough explanation of SAC codes, including their purpose and a comprehensive list of these codes.
What is the SAC code in GST?
The term SAC stands for Service Accounting Code. This code is specifically used for all services provided within India. The SAC system plays a crucial role in the identification, classification, measurement, and application of GST to services across the country. While the Harmonized System Nomenclature (HSN) code is used for goods in India, based on the World Customs Organization's (WCO) global classification system, the SAC code system is derived from the United Nations Central Product Classification (UNCPC). The CBIC has adapted the UNCPC framework to suit the Indian context, including specific modifications suggested by the committee tasked with implementing the SAC system. Services categorized under SAC codes within the GST framework are subject to five different tax rates: 0%, 5%, 12%, 18%, and 28%. Any service not explicitly listed in the SAC directory or without an assigned SAC code is automatically subject to an 18% GST charge. The assignment of unique SAC codes to various services allows the government to efficiently track and analyze GST revenue generated from each service category.
What is the SAC Number?
Under the GST system, each SAC code is a six-digit number. All SAC codes begin with '99' because services fall under Chapter 99. The remaining four digits specify the exact nature of the service. For instance, the SAC code 995411 is designated for general construction services pertaining to multi-storied residential buildings, single dwellings, or multiple dwellings.
- 99 signifies the 'chapter', indicating services, a prefix common to all SAC codes.
- 54 denotes the 'heading' for the primary service group, which is 'construction services' in this illustration.
- 11 identifies the 'service code', providing a detailed description of the main service, specifically 'general construction services of buildings'.
What is the Use of SAC Code in GST?
Service Accounting Codes serve several key functions:
- They assign distinct numerical codes to various services, facilitating straightforward differentiation.
- They assist GST-registered businesses in determining the correct GST rate for the services they provide.
- Businesses subject to GST must include these SAC codes during their registration on the GST portal, on their invoices, and in their GST returns.
Key Distinctions Between SAC Codes and HSN Codes
SAC codes and HSN codes have important differences, which are outlined below.
| Description | SAC Code | HSN Code |
|---|---|---|
| Goods vs Services Identification | SAC codes are used for classifying services. | HSN codes are used to classify goods. |
| Source Code | SAC codes are a modified version of the UNCPC system by the CBIC, tailored for Indian services. | HSN codes are based on the WCO's HSN nomenclature system, used globally for goods classification. While the WCO system uses 6 digits for over 5,000 commodity groups, Indian HSN codes are modified to 8 digits. |
| Number of Digits | SAC codes comprise 6 digits. | HSN codes consist of 8 digits. |
| Example | For SAC code 998314: 99 is common for services. 83 indicates 'IT services'. 14 details the service nature, such as design and development. | For HSN code 62011210: 62 denotes 'Apparel and clothing accessories'. 01 signifies 'boys' and men's overcoats, jackets, etc.'. 12 specifies 'boys' and men's raincoats of cotton'. 10 further details 'cotton raincoats'. |
List of SAC Codes and Description
You can access the complete list of SAC codes along with the description of services here.
Length of SAC Code for GSTR-1 and Invoice
As per Notification Number 78/2020, CT(R), dated 10th November 2020, service providers with an aggregate turnover exceeding Rs.5 crore in the preceding year must provide all six digits of the SAC code on invoices and when filing GSTR-1 returns. These regulations became effective on April 1st, 2021.
However, for service providers whose annual aggregate turnover is below Rs.5 crore, the following rules apply:
| Supply of Services | SAC digits |
|---|---|
| To Registered B2B business | 4 |
| To consumers or composition dealers, i.e., B2C | 4 but optional |
| To unregistered dealers | Nil |
Any non-compliance with these provisions may result in a penalty of Rs.50,000 under the IGST Act, or Rs 25,000 each under the CGST and SGST Acts.
Conclusion
In summary, the SAC code is a 6-digit number used within the GST regime to identify and categorize services into broad groups. Service providers are mandated to include SAC codes on their GST invoices and when filing GSTR-1 returns.