The United Nations Statistical Division (i.e.; UNSD) developed the UN Central Product Classification (i.e.; UN-CPC), and based on this, the Central Board of Indirect Taxes and Customs (i.e., CBIC) developed the SAC codes with some modification in the Indian context.
What is Service Accounting Code (SAC)?
The term SAC stands for Service Accounting Code. We use It to classify services under GST.
History of Service Accounting Codes (SAC)
The United Nations Statistical Division (i.e.; UNSD) developed the UN Central Product Classification (i.e.; UN-CPC), and based on this, the Central Board of Indirect Taxes and Customs (i.e., CBIC) developed the SAC codes with some modification in the Indian context.
SAC codes were first introduced in 1994 under the service tax regime.
As of now, the UN-CPC covers almost all service categories, and all 193 UN countries use it. Under the SAC system developed by UNSD, each service carries a six-digit code shown in the table below.
| SAC Structure provided by UNSD via UNCPC | |
| Digits | Reference |
| First 2 digits | Represent – Chapter (i.e.; broad category of services) |
| Next 2 digits | Represent – Headings (i.e.; sub category of services) |
| Last 2 digits | Represents -Sub Headings (i.e.; specific service) |
Entry of SAC in India under GST System
India adopted the same SAC system as of service tax regime under Goods and service Tax (GST) on 01 July 2017.
Chapter 99 of the GST Services Tariff governs the SAC codes. It does not form part of the Customs Tariff Act, 1975, and the GST system has specifically developed it for service classification. All the SAC codes are start from 99.
Let’s understand with an example:
The 6 -digit SAC code of— Transport services is 996511.
Let’s bifurcate the SAC code 996511 by applying the rule as explained above:
| SAC Structure -99-65-11 | |
| Digits | Reference |
| First 2 digits— “99” | Represent – Chapter 99 of “GST Services Tariff” |
| Next 2 digits— “65” | Represent – Headings (i.e.; sub category of service —”Transport service”) |
| Last 2 digits—”11” | Represent -Sub Headings (i.e.; specific service —Trasport service by road) |
HSN Code Under GST
As Service Accounting Code (SAC) are used for classifying the services, likewise, HSN codes are used to classifying the goods under GST. You can access our detailed blog on HSN code through the following Link:
What is HSN and Its Relevance Under GST? – A Detailed Analysis
Provisions regarding Service Accounting Codes (SAC) under GST
As of now, there is no specific section under the CGST Act 2017, that directly provides the mechanism for classifying the services. However, section 9 of the CGST Act 2017, is a charging section which imposes GST on services supplied and rule 46 of the CGST rules 2017, requires to use SAC code on tax invoice. This requires that the services are required to be classified for applying the correct GST rates.
Who are required to use Service Accounting Codes (SAC)?
The combined reading of first proviso to rule 46 of the CGST Rules, 2017 and Notification No.12/2017-Central Tax dated 28.06.2017 read with notification No. 78/2020 – Central Tax, dated 15th October, 2020, provides the following explanations:
| Service Accounting Code (SAC) Requirement- “Based on turnover” with effect from 1 April 2021 | ||
| If Annual Aggregate Turnover in Previous Financial Year is: – | For B2B (Business to Business) Invoices | For B2C (Business to Customer) Invoices i.e.; {Retail Customers} |
| Up to INR 5 crore | Service Accounting Code (SAC) of 4 (four digits) is mandatory to be mentioned on tax invoice. | Service Accounting Code (SAC) is not mandatory to be mentioned on tax invoice. |
| Above INR 5 crore | Service Accounting Code (SAC) of 6 (six digits) is mandatory to be mentioned on tax invoice. | Service Accounting Code (SAC) of 6 (six digits) is mandatory to be mentioned on tax invoice. |
8 Digit Service Accounting Code (SAC)
There is no concept of 8-digit Service accounting code under GST.
How can you find Service Accounting Code (SAC) code?
Step 1 : You may access the website of central board of indirect taxes and customs (CBIC) to know the chapter 99 and broad category of the services in which you are dealing with. You can access the latest Service Accounting Code (SAC) using the link below:
https://cbic-gst.gov.in/gst-goods-services-rates.html
Step 2: Once you identify the broad service category in Step 1, use the SAC tool available on the government’s GST website. You can access it through the following link:
https://services.gst.gov.in/services/searchhsnsac
Where to report SAC in GSTR-1?
You must report information related to the supply of services in “Table-12” of Form GSTR-1. Report the required details in the following format:
- HSN (Put SAC under HSN field) **
- Description
- Total Taxable value**
- GST Rate**
- Integrated Tax –(IGST)**
- Central Tax (CGST)**
- State/UT Tax (SGST/UTGST) **
- Cess (if applicable)
** These fields are mandatory.
FAQ’s
1. What is the GST rate when a specific service does not appear under SAC?
The default GST rate of that service is 18%.
2.Is SAC mandatory for composition scheme service provider?
No, Composition scheme service providers are not eligible to charge GST as they issue Bill of Supply. They cannot issue tax invoices.
3.What happens if you use wrong SAC on tax invoice?
If you use wrong SAC code on tax invoice then you may face the following consequences:
- As SAC is linked to GST services. If you use the wrong SAC , it will result in a wrong classification of services and corresponding wrong charge of GST rate.
- Tax Invoice can be considered as invalid that will challenge the legality of the Tax invoice.
- Mismatch in SAC code may lead to mismatch in GSTR-1/GST2B, which may lead to denial of input tax credit (ITC) to buyer.
- You may face the financial penalty of INR 50,000/- of section 125 of the CGST Act for mentioning the incorrect SAC code on tax invoice and in GSTR-1.
4. Do we need an SAC for goods?
No, we need Service accounting code (SAC) to classify the services. We use HSN codes for classifying the goods.
5. I am dealing in 2 services. Can I use same SAC?
No, if your second service is altogether different then you cannot use the same SAC as you are using it for your first service. If your both services fall under the same category the you may use the same SAC.
