SAC (Services and Accounting Code) code is a classification system used by the Indian government to classify and levy taxes on various services businesses provide. The SAC codes are used to identify the type of service being offered and the applicable GST rate for that service.
SAC (Services and Accounting Code) codes are based on the Harmonized System of Nomenclature, an internationally recognized system for classifying and codifying all the products worldwide. This system enables the compliance of GST based on international standards. It will provide a common structure to the government for the proper collaboration of data related to sales and purchases and analyze the same. SAC codes are used by businesses to file their GST returns and pay taxes to the government.
Breaking up the 6-digit SAC in GST. For example, the SAC for Information technology (IT) design and development services is 998314.
The main difference between the HSN and SAC is that HSN prescribed codes are meant specifically for Goods whereas SAC specifies codes for services. Other difference between both of them is the number of digits in their code and their relevance, for example, HSN code has 8 Digit codes whereas SAC has 6 digit codes.
The SAC codes and GST rates against the different services give the dealers and business people a clear understanding of the tax levied on the services they offer or the services they receive.
The use of SAC (Services Accounting Code) in GST (Goods and Services Tax) is to classify and levy taxes on various services provided by businesses. SAC codes are unique six-digit codes assigned to each service, and they help identify the type of service being offered and the applicable GST rate for that service.
The use of SAC codes in GST has several benefits for businesses and the government, such as:
The SAC (Services Accounting Code) code and HSN (Harmonized System of Nomenclature) code are both classification systems used to identify goods and services for tax purposes under the GST (Goods and Services Tax) in India. While both codes are designed to classify goods and services, they differ in the following ways:
Example:-
Suppose a business provides the service of software development. The SAC code for software development is 998314. The first two digits (99) represent the major service category of Information Technology. The next two digits (83) represent the specific software development service, and the final two digits (14) represent the sub-service of custom software development.
On the other hand, if a business sells a mobile phone, the HSN code for mobile phones is 8517.12.00. The first two digits (85) represent the chapter on electrical machinery and equipment. The next two digits (17) represent the heading of telephone sets. The next two digits (12) represent the subheading of mobile phones, and the final two digits (00) represent the product code.
As per the GST (Goods and Services Tax) rules, it is mandatory for service providers to furnish the SAC (Services Accounting 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 (Business-to-Business) transactions.
This requirement helps properly classify services and ensures that the correct GST rate is applied to the transaction. The SAC code also helps the government to monitor and regulate the collection of taxes and ensure compliance with the GST law.
Businesses with an annual aggregate turnover of up to Rs. 5 crores must mention the HSN (Harmonized System of Nomenclature) code for goods and a 4-digit SAC code for services on their invoices. However, if a business's turnover exceeds Rs. 5 crores, it must use an 8-digit HSN code for goods and a 6-digit SAC code for services.