The introduction of the Goods and Services Tax (GST) system in India brought about a dramatic change in the taxation environment of the nation. Its objectives were to streamline the tax system, encourage transparency, and simplify the taxing procedure. The Harmonised System of Nomenclature (HSN) for commodities and the Service Accounting Code (SAC) for services are two distinct systems of codes used in the commodities and Services Tax (GST) classification and taxation processes. We will delve into what is SAC code in GST in this post, examining its significance, definition, and role in streamlining the GST procedure.
What Do You Mean by the SAC Code in GST?
SAC full form is the Service Accounting Code. It is a systematic classification system used for services. The codes are essential for the identification, measurement, and taxation of services. Notably, all service-related codes commence with the number 99, making distinguishing between HSN (Harmonized System of Nomenclature) and SAC easy.
In India, an 8-digit HSN/SAC code is employed instead of a 6-digit one. The initial two digits signify the chapter in which the goods or services are listed in the Code List. The following two digits pertain to the chapters, while the subsequent two digits represent specific products. The final two digits further refine the product classification. It’s worth noting that HSN/SAC codes apply to commodities in more than 200 countries, and these codes generally remain consistent for most goods. However, some countries may have slight variations in HSN numbers based on the nature of the items classified.
What is the SAC Number?
The full form of SAC is Service Accounting Code. Let’s dissect the six-digit SAC in GST framework. As an illustration, take the SAC in GST for IT, or Information Technology design and development services, 998314.
- The first two digits within the SAC, which are consistent across all services, are ’99.’
- The subsequent two digits indicate the primary nature of services, in this instance, concerning IT services.
- In this case, the final two digits elaborate on the specific nature of services, focusing on development and design services.
The critical distinction between SAC and HSN lies in their intended usage. HSN codes are primarily designed for goods, whereas SAC codes are devised to classify services. Another distinguishing factor between these coding systems is the number of digits they encompass and their respective relevance. For example, HSN codes consist of 8 digits, while SAC in GST are composed of 6 digits.
The Significance of SAC Codes
The GST framework relies heavily on SAC codes, whose importance may be summed up as follows:
1. Accurate Taxation
SAC in GST make it easier to tax and classify different services accurately. Because every service has a unique SAC code in GST, there is minimal space for confusion, guaranteeing that tax rates are applied correctly. For enterprises and service providers, this accuracy contributes to a decrease in tax disputes and streamlines the tax compliance procedure.
2. Uniformity Across India
The SAC code system ensures nationwide conformity in service taxes. This implies that if the SAC code is the same, the same service will be taxed at the same rate, whether rendered in a different state. Compared to the pre-GST era, when tax rates for the same service may differ from state to state, this is a considerable change.
3. Ease of Compliance
Comprehending and using the SAC code system facilitates the GST return filing procedure for service providers. The GST returns must include the relevant SAC code to guarantee precise tax computations and prevent fines. Using the approved SAC code, businesses can match their reporting and invoicing with the GST requirements.
4. Efficient Tax Administration
SAC codes help tax authorities administer GST more effectively. Tax authorities can more easily confirm the correctness of tax payments and compliance when companies and service providers use the right SAC codes. In the end, this helps the government collect taxes and maintain oversight.
Is it Mandatory to Mention the SAC Code in The Invoice?
According to the regulations outlined in the Goods and Services Tax (GST) framework, service providers must provide the Services Accounting Code (SAC) when their annual aggregate turnover surpasses Rs. 5 crore. In cases where businesses generate revenue below Rs. 5 crore, they must furnish a 4-digit SAC in GST for business-to-business (B2B) transactions.
This stipulation serves the essential purpose of accurately categorising services and ensuring the application of the correct GST rate to each transaction. Furthermore, the SAC code is pivotal in enabling government oversight and control over tax collection and facilitating adherence to the GST law.
For businesses with an annual aggregate turnover of up to Rs. 5 crore, the invoicing protocol mandates the inclusion of the Harmonized System of Nomenclature (HSN) code for goods alongside a 4-digit SAC code for services. However, if a business’s turnover surpasses the Rs. 5 crore mark, a more detailed 8-digit HSN code will be used for goods and a 6-digit SAC code for services.
GST Rates and SAC Codes
The SAC code in GST given to a service calculates the GST rate for that service. The government has established four GST rate slabs for services:
- 5% GST: The majority of services fit within this group. These services’ SAC codes usually begin with the first digit, “9,” designating Section 9 services.
- 12% GST: A 12% GST charge applies to services, including business assistance and IT services. The relevant SAC codes for these services usually begin with “9” and contain distinct second and third digits.
- 18% GST: Certain services, such as restaurant services, are subject to an 18% GST tax. Typically, their SAC codes begin with “9” and include unique numbers for the second and third digits.
- 28% GST: Certain luxury services are subject to a 28% GST rate; these services are identified by SAC codes that begin with the number “9” and include distinct second and third digits.
Conclusion
An essential part of India’s Goods and Services Tax (GST) system is the Service Accounting Code (SAC). It is essential to categorise correctly and tax services to maintain consistency throughout the nation. Businesses and service providers may simplify their GST compliance and help the GST regime succeed by utilising the right SAC code. To minimise compliance problems and enable efficient tax administration under GST, all parties involved must thoroughly understand the SAC code system.
FAQs
Q1. What is SAC code in GST?
SAC (Services Accounting Code) is a unique 6-digit code used to classify services as per GST. It is like HSN code used for classifying goods.
Q2. Who needs SAC code under GST?
Any supplier providing services needs to mention appropriate SAC code on the invoice, under GST law.
Q3. Where can I find SAC code for my service?
The SAC code finder tool on GST portal can be used to find suitable code by entering service name or description.
Q4. What is the structure of a SAC code?
SAC code has 6 digits divided into 2 parts – first 2 digits denote service chapter and next 4 digits denote specific service.
Q5. Is SAC code mandatory on tax invoice?
Yes, all registered service providers have to mandatorily mention relevant SAC code on their tax invoice.
Q6. Can one service have multiple SAC codes?
No, each service can have only one SAC code. However, one SAC code can cover similar services.
Q7. How many SAC codes are there in total?
Approximately 500 SAC codes have been notified by the GST Council covering all types of services.
Q8. Is SAC code required for exempt services?
Yes, SAC code is mandatory even for exempted or nil rated services to identify the type of service clearly.