Table of contents:
- What is a SAC code in GST?
- Clear structure of SAC
- Importance of SAC Code for Businesses
- Application of Service Accounting Codes (SAC) for Real Estate industry
- SAC code for consultancy services
- Servicing Accounting Code for transport services
- Key differences between SAC Code and HSN Code
- SAC Code for GSTR-1 and Inclusion in invoices
- Conclusion
In India, the Goods and Services Tax (GST) system is integral to business operations, streamlining tax processes and unifying the taxation structure. Within this framework, the Service Accounting Code (SAC) categorizes different services for easier identification and taxation. Each service, from consultancy to transport, is assigned a unique SAC code, ensuring clarity and accuracy in GST compliance.
Let’s understand this in detail.
What is a SAC Code in GST?
A Service Accounting Code (SAC) is a unique six-digit alphanumeric code assigned to various goods and services under the Goods and Services Tax (GST) regime in India. It serves as a classification system that categorizes products and services based on their nature and usage. The Central Board of Indirect Taxes and Customs (CBIC) is responsible for maintaining and updating the list of SAC codes.
Structure of SAC Codes
A SAC code consists of six digits. The first two digits represent the category of service, another 2 represents, type of services in category, while the last 2 digits represent the specific service within that category.
A typical SAC code structure follows a six-digit format: XXYYZZ.
- XX – Service category
- YY – Service type within category
- ZZ – Specific service
For example, 996512 may represent a certain class of transportation service, and each digit group provides clarity about the specific service.
Why are SAC Codes Important?
It has high-value significance and a very important role for businesses:
- Accurate Tax Calculation: This ensures accurate tax calculations and prevents potential disputes with tax authorities.
- Smooth GST Returns Filing: Businesses can simplify the GST return filing process with accurate SAC codes. The GST software can automatically calculate tax liabilities, reducing the risk of errors and delays.
- Input Tax Credit (ITC): Accurate SAC codes are essential for claiming the correct amount of ITC.
- GST Compliance: Accuracy in the SAC code for GST invoices and returns is important. Non-compliance can lead to penalties and legal issues.
Knowing the SAC Code for a Product or Service
There are several methods to determine the SAC code for a specific product or service:
- GST Rate Finder Tool: The government provides a user-friendly GST Rate Finder Tool. By entering the description of the product or service, you can obtain the corresponding SAC code.
Link: https://services.gst.gov.in/services/searchhsnsac
- GST Rate Notification: The latest GST Rate Notification issued by the CBIC contains a comprehensive list of goods and services along with their respective SAC codes.
- Consulting a Tax Professional: If you encounter difficulties in determining the correct SAC code, it is advisable to consult with a tax professional or chartered accountant.
You can also download this excel and search for your services to find the right SAC code – https://tutorial.gst.gov.in/downloads/HSN_SAC.xlsx
Key differences between SAC code and HSN code usage
| Feature | SAC Code | HSN Code |
| Purpose | Classification of services | Classification of goods |
| Usage | Goods and Services Tax (GST) | Customs duties and other taxes |
| Code Length | 6 digits 6-digit standard for services (e.g., 998313 for consultancy) |
4, 6, or 8 digits 4-digit for broad category, 6 or 8 for specific goods (e.g., 1006 for rice) |
| Administering Authority | Central Board of Indirect Taxes and Customs (CBIC) | Directorate General of Foreign Trade (DGFT) |
| Application | Applicable to services provided by businesses | Applicable to goods imported or exported |
| Impact on Tax Rates | Determines the GST rate applicable to a service | Determines the customs duty and other taxes applicable to a good |
| Impact on Input Tax Credit (ITC) | Affects the eligibility and calculation of ITC for services | Affects the eligibility and calculation of ITC for goods |
| Record-Keeping | Businesses must maintain records of SAC codes used for services provided | Businesses must maintain records of HSN codes used for goods imported or exported |
| Compliance | Non-compliance with SAC codes can lead to penalties and legal issues | Non-compliance with HSN codes can lead to customs penalties and delays in clearance |
| Scope | Used for both domestic and international goods | Primarily used within India’s GST system for services |
Applications of SAC Codes
- Real Estate Services
- Involving Owned or Leased Property:
This category encompasses a wide range of services related to real estate properties that are owned or leased. Some specific examples include:- Property Leasing and Renting: Services provided by property owners or landlords to lease or rent out their properties.
- Property Management: Services offered by property management companies or individuals to manage and maintain properties on behalf of owners.
- Real Estate Brokerage: Services provided by real estate agents or brokers to facilitate the buying, selling, or leasing of properties.
- Property Valuation: Services offered by professionals to assess the market value of a property.
- For Real Estate Agents:
This category specifically covers services provided by real estate agents or brokers, such as:- Property Listing and Marketing: Services involving listing properties for sale or rent on various platforms and marketing them to potential buyers or tenants.
- Client Representation: Services provided to clients in buying, selling, or leasing properties.
- Negotiation and Deal Closure: Services involving negotiation of terms and conditions and closing of real estate deals.
- Involving Owned or Leased Property:
- Other Services
- Consultancy Services:
This category includes a wide range of professional services provided by consultants, such as:- Management Consultancy: Providing advice and guidance on various management aspects, such as strategy, operations, and human resources.
- Financial Consultancy: Providing advice on financial matters, such as investment planning, tax planning, and risk management.
- Legal Consultancy: Providing legal advice and representation on various legal matters, such as contract drafting, litigation, and corporate law.
- IT Consultancy: Providing advice and solutions related to information technology.
- Transport Services:
This category encompasses various modes of transportation, including:- Road Transport: Services provided by road transport operators, such as trucking, logistics, and courier services.
- Rail Transport: Services provided by railway operators for passenger and freight transportation.
- Air Transport: Services provided by airlines for passenger and cargo transportation.
- Water Transport: Services provided by shipping companies for transportation of goods by sea or inland waterways.
- Consultancy Services:
Understanding of SAC codes for the businesses is a necessity and classifying it accurately is making their life easy with GST compliances.
SAC Code for GSTR-1 and Inclusion in Invoices
When filing GSTR-1, it is mandatory to mention the correct SAC code for each supply of service. This helps in accurate calculation of GST liability and ensures compliance with GST regulations. The SAC code should be entered in the relevant fields of the GSTR-1 form.
It’s mandatory to mention of SAC code in the invoices raised for the supply of services. This helps in:
- Accurate Tax Calculation: The recipient of the invoice can verify the correct GST rate applied based on the SAC code.
- Input Tax Credit (ITC): The recipient can claim ITC only if the correct SAC code is mentioned on the invoice.
- GST Audit: In case of a GST audit, having the correct SAC code on invoices can help in justifying tax calculations.
Ensure the correct SAC code is used for each service provided. By following these guidelines, businesses can ensure accurate GST compliance and avoid potential penalties.
Conclusion
By understanding the basics of SAC codes, their importance, and how to determine them, businesses can effectively manage SAC codes and minimize the risk of tax-related issues.
To ensure accurate compliance, businesses should:
- Stay Updated: Keep abreast of the latest GST Rate Notifications and any changes in SAC codes.
- Consult Experts: Seek advice from tax professionals when in doubt.
- Maintain Accurate Records: Keep detailed records of all transactions, including the SAC codes used.
- Utilize GST Software: Leverage technology to automate calculations and streamline the filing process.
FAQs
What happens if I use an incorrect SAC code?
A product manager with a writer's heart, Anirban leverages his 6 years of experience to empower MSMEs in the business and technology sectors. His time at Tata nexarc honed his skills in crafting informative content tailored to MSME needs. Whether wielding words for business or developing innovative products for both Tata Nexarc and MSMEs, his passion for clear communication and a deep understanding of their challenges shine through.
How SAC code impact the calculation of ITC for service providers?
So SAC codes are assigned by GST authority and it will remain unchanged for always. correct?
When I first started my business, I had no idea what an SAC code was or how it impacted GST compliance. A few mistakes later, I quickly realized the importance of getting these codes right. Now I keep a checklist handy before every filing.
Reports show that the use of SAC codes has led to more transparent tax filings, with 80% of businesses reporting improved accuracy in GST returns. This just goes to show the impact of structured classification.