An Explainer on Service Accounting Code (SAC) Under GST

At the time of GST’s introduction, the Central Board of Indirect Tax and Customs (CBIC) implemented the HSN and SAC code systems for the easy classification of goods and services. In this article, gain a complete understanding of what is SAC code, a list of SAC codes and why we use it.

What is the SAC code in GST?

The SAC code means Services Accounting Code. It applies to all the services rendered within India. Thus, the SAC code system is used for identifying, classifying, measuring, and determining the applicability of GST on services in India.

The Harmonized System Nomenclature (HSN) code is applicable to Indian goods. HSN code is based on World Customs Organization’s (WCO) multipurpose nomenclature code utilised for uniformly classifying goods worldwide. On the other hand, the SAC code system is based on the United Nations Central Product Classification (UNCPC). But it has been modified per the Indian context by the CBIC. 

Even the explanatory notes given for the classification of services in India are based on the notes in the UNCPC system. Additionally, this code and its notes include some modifications, as recommended by the committee constituted for the implementation of the SAC system in India.

Under the GST regime, services, as classified under the SAC code, are taxed under five different tax slabs, which are 0%, 5%, 12%, 18%, and 28%. However, the services that are not mentioned under the SAC list or have not been allotted any SAC code will attract an 18% GST levy by default.

Since distinct SAC codes are associated with services, their allocation enables the government to analyse the GST collections made for respective services.  

What is the SAC Number? 

Under GST, a SAC code consists of six digits. Since services are covered under chapter 99, all SAC codes start with 99. While the other four digits explain the nature of the service. Let’s understand with an example.

For example, 995411 is the SAC code for general construction services of multi-storied residential buildings, single dwellings, or multi-dwelling.

Here,

• 99 represents ‘chapter’, which in this case, refers to services and is common to all SAC codes.
• 54 represents the ‘heading’ of the major service category, which is ‘construction services’ for this illustration.
• 11 represents the ’service code’ of the specific nature of the major service, which, in this case, is ‘general construction services of buildings.’ 

What is the Use of SAC Code in GST?

SAC codes serve multiple purposes, including:

• They allocate unique codes to different services, thus enabling easy distinguishing.
• They help GST taxpayers identify the GST rate applicable to the services rendered by them.
• GST taxpayers are required to state these SAC codes when they register on the GST portal, on their invoices and in GST returns. 

Differences between SAC Code and HSN Code with Example

SAC codes and HSN codes differ significantly from each other. We highlight a few differences below.

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 10^th November 2020, a service supplier with an aggregate turnover exceeding Rs.5 crore in the previous year will need to furnish all six digits of the SAC code for invoices as well as the filing of GSTR-1. These changes went into effect on 1st April 2021.

However, when a service provider’s annual aggregate turnover is under Rs.5 crore, then the following rules apply:

Any non-compliance with the above provisions will result in a penalty of Rs.50,000 under the IGST Act or Rs 25,000 each under CGST and SGST.

Conclusion

To summarise, the answer to ‘what is sac code’ is that it is a 6-digit number used to identify and classify services into broad categories under the GST regime. Service providers must furnish SAC codes when filing GSTR-1 returns and invoices.

FAQs on SAC under GST 

What is the SAC code in GST?

Under GST, the SAC code means the code under which services are supplied. A SAC code helps in the easy classification of the services provided.

What is the SAC code in an invoice?

The SAC code in an invoice is the code associated with the services supplied by the GST taxpayer. For a complete list of SAC codes and their description, refer here.

Is the SAC code mandatory for the GST invoice?

Yes, it is mandatory for service providers to furnish the SAC code if their annual aggregate turnover exceeds Rs.5 crore. For businesses earning below Rs.5 crore, a 4-digit SAC code must be furnished for B2B transactions. 

Are SAC and HSN codes the same thing?

No, SAC codes and HSN codes are different. HSN codes are used to classify goods, and SAC codes are used for services.

Why SAC code is required?

Since exclusive SAC codes are allotted to diverse services, they help in the easy identification of services rendered and the applicable tax rates under the GST regime. Also, these codes need to be mentioned on the GST invoice.