SAC Code in GST: Full Form, Meaning, Benefits, Uses, and Examples

SAC stands for Service Accounting Code and is a standardized six-digit number used to categorize services under India's Goods and Services Tax (GST) framework. This code helps classify services for taxation, enabling accurate assessment of GST applicability. SAC codes always start with "99," representing the service category. The subsequent four digits provide further clarity: the next two indicate the primary nature of the service, while the last two specify its detailed characteristics.

For example, the SAC code "996334" refers to operation services of water treatment, sewage treatment, and other treatment plants. Here, "99" signifies services, "63" denotes supporting services in water, sewage, and waste management, and "34" pinpoints the exact service type—operation services of various treatment plants.

The SAC system is tailored for India, although it is derived from the United Nations' classification framework. While the HSN code is used to classify goods based on the World Customs Organization’s standards, SAC codes focus exclusively on services, enabling easier GST application and compliance.

What is the SAC Code in GST?

A Service Accounting Code (SAC) is a distinctive six-digit identifier employed under the Goods and Services Tax (GST) framework to categorise services for taxation purposes. The structure of SAC codes is designed to convey essential details regarding the nature of the service being provided.

Each SAC code begins with the digits "99," which denotes that the code pertains to the service category. The following four digits serve to further specify the exact type of service, allowing for more precise classification. This classification system plays a vital role in ensuring that services are correctly taxed, facilitating compliance and aiding in the efficient collection of GST. Assists in applying the correct GST rate based on the type of service.

By utilising SAC codes, businesses can streamline their accounting processes and ensure adherence to tax regulations. Moreover, this systematic approach helps tax authorities monitor and assess service transactions more effectively. Understanding and accurately applying the correct SAC code is essential for service providers, as it directly impacts their tax liabilities and reporting obligations. Overall, the SAC is an integral part of the GST framework, contributing to the transparency and efficiency of the taxation system in India.

What is the use of service accounting code in GST?

The Service Accounting Code (SAC) in the Goods and Services Tax (GST) framework serves several vital functions:

Service identification

SAC codes provide a unique identifier for each service, facilitating the differentiation and categorisation of various offerings. This structured approach enhances the classification and monitoring of services for taxation purposes.

GST rate determination

SAC codes play a critical role in determining the applicable GST rate for specific services. By referring to the SAC code linked to a service, GST taxpayers can quickly identify the correct tax rate that should be applied.

GST registration

When registering on the GST portal, taxpayers must utilise SAC codes to detail the specific services they provide. This ensures adherence to GST regulations and proper categorisation of services.

Invoicing

Taxpayers are required to include the relevant SAC code on invoices issued to clients for services rendered. This inclusion promotes transparency in tax calculations and aids clients in understanding the GST implications of the services they receive.

GST returns

When filing GST returns, it is essential for taxpayers to report service-related transactions using the appropriate SAC codes. This step is crucial for accurate tax reporting and ensuring compliance with GST regulations, ultimately contributing to the efficiency of the tax system.

What is the use of the Service Accounting Code in GST?

The SAC code system is instrumental in the GST framework for several reasons:

1. Simplification of Tax Filing: It simplifies the tax filing process by providing a clear categorisation of services.
2. Facilitation of Business Loans: By ensuring compliance with GST, businesses can more easily meet the business loan eligibility criteria, which often requires adherence to tax regulations.
3. Enhanced Record Keeping: Helps in better record-keeping and financial management for businesses.

How is SAC code important for business?

SAC codes are vital for ensuring effective service classification, tax compliance, and transparency in the GST framework.

• Unique Service Classification: SAC codes provide unique identifiers for each service, simplifying the classification and differentiation of services for tax purposes.
• Determining Applicable GST Rates:These codes are crucial in establishing the applicable GST rates for services, enabling taxpayers to quickly ascertain the correct tax rates based on the services provided.
• Compliance in GST Registration: SAC codes are required during GST registration, ensuring that taxpayers accurately identify the services they offer, thereby complying with GST regulations.
• Enhancing Invoice Clarity: Incorporating SAC codes on invoices improves transparency in tax calculations, assisting clients in understanding the GST implications of the services rendered.
• Ensuring Precise GST Reporting: When submitting GST returns, taxpayers are required to report service transactions using the correct SAC codes, which is vital for precise tax reporting and compliance.
• Facilitation of Business Loans: By ensuring compliance with GST, businesses can more easily meet the business loan eligibility criteria, which often requires adherence to tax regulations.

How does SAC code work in GST?

Under the Goods and Services Tax (GST) framework, the Service Accounting Code (SAC) is a six-digit code designed to classify services. The first two digits, "99," indicate that the code pertains to the services chapter. The following four digits offer a more detailed classification, specifying the major service category and the exact nature of the service provided.

For example, in the SAC code 995411, "99" identifies the chapter related to services, while "54" corresponds to the major service category of construction services. The final two digits, "11," further detail this category, denoting general construction services for buildings.

This structured approach helps streamline the taxation process by clearly categorising various services, facilitating compliance for service providers and enhancing transparency for tax authorities. By using SAC codes, businesses can ensure they are applying the correct tax rates and adhering to GST regulations. Overall, the SAC system plays a vital role in the efficient implementation of GST, allowing for better monitoring and categorisation of service-related transactions within the Indian economy.

SAC code for consultancy services

For consultancy services, specific SAC codes are designated to differentiate between various types of consultations. This categorisation allows for accurate tax application and compliance, essential for consultancy firms seeking business financing options. Adherence to these codes not only simplifies tax filing but also reinforces a consultancy's eligibility for business loans. The tax codes for consultancy services are as below:

• Financial Consultancy Services: 997156
• Corporate tax consulting and preparation services: 998231
• Individual tax preparation and planning services: 998232

Service Accounting Codes (SAC) for transport services

Transport services, from freight to passenger conveyance, have designated SAC codes, which helps distinguish between various transport service types. Some of the SAC codes for transport services are:

SAC Code	Service description
996421	Passenger rail transport services over long distances, including railways, metros, and similar systems
996422	Long-haul passenger road transport services via buses, cars, unscheduled bus and coach services, and stage carriages
996423	Services for taxis, including radio taxis and similar types of passenger transport
996424	Passenger transport services over coastal and international waters using ferries, cruise ships, and similar vessels
996425	Scheduled air travel services for passengers, both domestic and international
996426	Air transport services for passengers on an unscheduled basis, covering both domestic and international flights
996429	Miscellaneous long-distance passenger transport services not classified elsewhere

Service Accounting Codes (SAC) for real estate agents

Real estate agents offering various services fall under specific SAC codes for GST purposes. Here are the relevant SAC codes for real estate brokers:

• SAC Code 997221: Applies to property management services provided under a contract or for a charge.
• SAC Code 997222: Covers building sales conducted under a contract or on a fee/commission basis.
• SAC Code 997223: Pertains to land sales conducted under a contract or on a fee/commission basis.
• SAC Code 997224: Real estate evaluation services fall under this code and are offered under a contract or for a charge.

For all real estate services provided on a fee/commission basis or under a contract, the applicable GST rate is 18%.

These SAC codes are essential for real estate agents to accurately classify their services for GST purposes and determine the appropriate tax rate for their transactions.

Service Accounting Codes (SAC) for real estate services involving owned or leased property

Real estate services related to owned or leased property are categorized under specific SAC codes for GST purposes. Here are the relevant SAC codes for such services:

• SAC Code 997211: Applies to rental or leasing services involving owned or leased residential property.
• SAC Code 997212: Covers rental or leasing services involving owned or leased non-residential property.
• SAC Code 997213: Pertains to trade services of buildings.
• SAC Code 997214: Relates to trade services of time-share properties.
• SAC Code 997215: Involves trade services of vacant and subdivided land.

It’s important to note that services involving renting out residential properties for habitation are exempt from tax. However, the applicable GST rate for additional rental services is 18%. These SAC codes help accurately categorize and tax real estate services involving owned or leased properties.

How do you find the Service Accounting Code number for a property?

Finding the Service Accounting Code (SAC) number for a property involves several steps:

• Identify the service: Determine the specific service related to the property, such as property management, rental, or real estate brokerage.
• Access official resources: Visit the official website of the relevant tax authority, such as the Goods and Services Tax (GST) portal in India.
• Use search tools: Utilize the SAC code search tool provided on the portal. Enter keywords related to the property service.
• Review codes: Review the list of SAC codes generated by the search. Each code is associated with a specific service description.
• Consult documentation: Refer to official GST documentation or guides for detailed descriptions and examples to confirm the correct SAC code.

By following these steps, you can accurately find the SAC number for a property-related service.

SAC Code Length Requirements for GSTR-1

The Services Accounting Code (SAC) length requirement varies based on the annual aggregate turnover of service providers. Below is a breakdown of the key details:

1. Turnover Over Rs. 5 Crore: Service providers must include all 6 digits of the SAC code on invoices and during the filing of GSTR-1. This requirement has been mandatory since April 1, 2021.
2. Turnover Under Rs. 5 Crore:
   • B2B Transactions: Only 4 digits of the SAC code are required for registered businesses.
   • B2C Transactions: SAC code is optional; when used, only 4 digits are necessary.
   • Unregistered Dealers: No SAC code is required.
3. Non-Compliance Penalties: Failure to follow these SAC code requirements can result in penalties of Rs. 50,000 under the IGST Act or Rs. 25,000 each under the CGST and SGST Acts.

These regulations, effective since November 2020, ensure correct SAC code usage and accurate GST reporting based on service providers' turnover.

Differences between SAC Code and HSN Code

The SAC and HSN codes serve similar purposes but in different contexts. While SAC is used for services, the Harmonised System of Nomenclature (HSN) code is used for goods. Key differences include:

Description	SAC Code	HSN Code
Goods vs Services Identification	SAC codes are allotted to services.	HSN codes are used to classify goods.
Source Code	SAC codes are a modified version of the UNCPC code system. These changes were made by the CBIC and apply to all services supplied in India.	HSN codes are based on WCO’s HSN nomenclature system, which is used worldwide for classifying goods. While WCO’s harmonised system separates goods into over 5,000 commodity groups with a 6-digit number, Indian HSN codes have been modified to an 8-digit number.
Number of Digits	SAC codes comprise 6 digits.	HSN codes constitute 8 digits.
Example	Consider the SAC code 998314	Consider the HSN code 62011210
		62 represents the chapter ‘Apparel and clothing accessories that are neither crocheted nor not knitted.’
	99 stands for the common code for services.
		01 represents the heading of the chapter ‘boys’ and men’s overcoats, capes, coats, blazers, jackets, etc.’
	83 stands for the major service category, ‘IT services.’
		12 represents the subheading of the chapter and states that it only deals with boys’ and men’s raincoats, overcoats, capes, car coats, and cloaks made of cotton.
	14 stands for the detailed explanation of the nature of the service rendered, which is design and development, in this case.
		10 represents an even more detailed description and talks about cotton raincoats.

Is it mandatory to mention the SAC Code in invoices?

Yes, mentioning the SAC code on invoices for service transactions is mandatory under the GST law. This requirement:

• Ensures transparency and clarity in the taxation process.
• Aids in the seamless filing of GST returns.
• Enhances the credibility of businesses when applying for business financing, as it demonstrates compliance with tax laws.

Why is the SAC number significant?

The Service Accounting Code (SAC) number is significant for several reasons:

• Tax compliance: SAC numbers help ensure compliance with tax regulations, particularly under the Goods and Services Tax (GST) regime, by accurately categorizing services for taxation purposes.
• Standardization: They provide a standardized system for identifying and categorizing services, which simplifies tax administration and helps in maintaining uniformity across different sectors and regions.
• Accurate tax calculation: Using the correct SAC number ensures that the correct tax rate is applied to services, preventing underpayment or overpayment of taxes.
• Documentation and reporting: SAC numbers are essential for proper documentation and reporting in tax returns, which is crucial for audits and financial transparency.
• Dispute resolution: They help in resolving disputes related to tax assessments by providing clear definitions and categories of services.

In summary, SAC numbers play a critical role in tax administration, compliance, and financial accuracy.

Conclusion

The SAC code system is an integral part of the GST regime, playing a crucial role in simplifying and standardising the taxation of services. Its relevance extends beyond tax compliance, impacting business financing and loan applications. By ensuring adherence to SAC requirements, businesses can streamline their operations, enhance their eligibility for business loans, and contribute to a transparent and efficient tax system. Understanding the concept of SAC code is not just about meeting regulatory requirements but also about leveraging financial opportunities in the landscape of Indian business financing.