Tax, Accounting, and Finance Chronicle

Service Accounting Code (SAC) is a code assigned by the Goods and Services Tax (GST) Council in India to classify different services under the GST regime. The SAC code is used to determine the rate of tax that is applicable to a particular service.

The SAC code is a six-digit code that helps the government keep track of services provided by various businesses and to ensure that the correct tax is levied on each service. Each service is assigned a unique SAC code, which is used to identify the service when an invoice is issued.

In a B2C (business-to-consumer) transaction under the GST regime, if the value of the supply of services exceeds Rs. 50 lakhs in a financial year, it is mandatory to mention the SAC code in the invoice.

Is SAC Code always of 6 Digits?

Yes, a Service Accounting Code (SAC) under GST is always a 6-digit number. The structure of a SAC code is as follows:

• The first two digits are always “99” as services are covered under Chapter 99.
• The next two digits represent the major nature of the service.
• The last two digits represent the detailed nature of the service.

Understanding 6 Digits SAC Code in GST

When navigating the complexities of the GST regime, it’s crucial for business owners to grasp the significance of the SAC code. The SAC, or Services Accounting Code, is a six-digit code used to classify services under GST. Let’s break down the SAC code using the example of advertising services, which is designated by the code 998361.

1. First Two Digits (99): The initial two digits, 99, are standard across all service codes. This universal prefix denotes that the classification pertains to services.
2. Middle Two Digits (83): The next pair of digits identifies the major nature of the service. For advertising services, the middle two digits are 83, signifying that the service falls under the advertising category.
3. Last Two Digits (61): The final two digits provide specific details about the service. In this instance, 61 indicates that the service is related to advertising.

Understanding the Role of SAC Codes in GST

In the realm of Goods and Services Tax (GST), the Services Accounting Code (SAC) plays a crucial role. These unique six-digit codes are assigned to each service, providing a systematic approach to classifying and levying taxes on various services offered by businesses. Let’s delve into the key purposes and benefits of SAC codes in the GST framework.

Benefits of SAC Codes in GST

1. Uniform Taxation:
   SAC codes ensure a standardized tax system across the country. This uniformity means that similar services are taxed consistently, irrespective of where they are provided. Such consistency is vital for maintaining fairness and transparency in the taxation process.
2. Service Identification:
   By assigning specific codes to different services, SAC codes make it straightforward to identify and categorize services. This clarity helps in determining the appropriate GST rate applicable to each service, facilitating accurate tax computation.
3. Simplified Compliance:
   Using SAC codes significantly eases the burden of compliance for businesses. These codes streamline the process of tax calculation and the filing of GST returns. As a result, businesses can manage their tax obligations more efficiently and with fewer errors.
4. Enhanced Monitoring and Tracking:
   For the government, SAC codes are invaluable in monitoring and tracking the provision of services. This capability aids in more effective tax collection and ensures that services are not underreported or misclassified, enhancing overall tax compliance and revenue generation.

In summary, SAC codes are an essential element of the GST system, fostering uniformity, simplifying compliance, and enhancing the government’s ability to monitor and collect taxes. For businesses, understanding and correctly using these codes is critical to ensuring smooth and accurate GST processes.

Is Mentioning the SAC Code on Invoices Mandatory?

Under the Goods and Services Tax (GST) regulations, service providers must include the Services Accounting Code (SAC) on their invoices, which is always a 6-digit code. This requirement becomes mandatory if their annual turnover exceeds Rs. 5 crore. For those with an annual turnover below this threshold, it is still necessary to include the SAC code for Business-to-Business (B2B) transactions.

Incorporating the SAC code is crucial for the accurate classification of services and ensures the correct GST rate is applied. This practice not only streamlines the taxation process but also aids the government in monitoring tax collection and enforcing compliance with GST laws.

For businesses with an annual turnover up to Rs. 5 crore, it is essential to list the Harmonized System of Nomenclature (HSN) code for goods and the 6-digit SAC code for services on their invoices. If the turnover surpasses Rs. 5 crore, the requirement shifts to an 8-digit HSN code for goods, while the 6-digit SAC code for services remains the same.

By adhering to these coding requirements, businesses facilitate efficient tax administration and contribute to a transparent and organized tax system.

SAC vs. HSN Codes

While SAC codes classify services, HSN (Harmonized System of Nomenclature) codes are used for goods. Here are the key differences between these two types of codes:

• Purpose: HSN codes are exclusively for goods, whereas SAC codes are designated for services.
• Code Length: HSN codes are typically eight digits long, offering a more granular classification for goods. In contrast, SAC codes are six digits, simplifying the categorization of services.

Understanding these distinctions helps businesses accurately classify their offerings, ensuring compliance with GST regulations and simplifying the tax filing process.

By focusing on these codes, businesses can streamline their GST filings, avoid penalties, and ensure they are in full compliance with government regulations.

Some of the different types of SAC codes are:

SAC 99 – Miscellaneous Services
SAC 98 – Services by way of transfer of a going concern
SAC 97 – Renting of immovable property service
SAC 96 – Construction services
SAC 95 – Business support services
SAC 94 – Transport of goods and passengers
SAC 93 – Financial services
SAC 92 – Telecommunication services
SAC 91 – Information technology services
SAC 90 – Tourist transport services

It is not possible for us to list all the Service Accounting Codes (SAC) under the Goods and Services Tax (GST) regime in India as there are thousands of SAC codes covering a wide range of services. The SAC codes are constantly being updated and new codes are being added, so a comprehensive list would be difficult to maintain.

It is important for businesses to use the correct SAC code for each service they provide and to keep themselves updated with the latest GST laws and regulations. Businesses can refer to the official GST website or consult a tax professional for the latest list of SAC codes.

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