SAC Code: Meaning, Full Form, Benefits, Difference & Compliance Guidelines in GST

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In Goods and Services Tax (GST) in India, understanding the details of the tax system is important for businesses and service providers. One essential component of this understanding is the SAC code, which plays an important role in the GST scenario. This comprehensive guide will help you understand the SAC code meaning, know SAC's full form, and the benefits it offers regarding GST.

What is the SAC Code in GST?

The SAC code system is based on the United Nations Central Product Classification (UNCPC), with modifications made to the Indian context by the CBIC. It contrasts the Harmonised System Nomenclature (HSN) code, which applies to goods. While HSN codes are used globally for classifying goods, SAC codes focus on services within the Indian taxation framework.

What is the SAC Number?

The SAC code system is based on the United Nations Central Product Classification (UNCPC), with modifications made to the Indian context by the CBIC. It stands in contrast to the Harmonised System Nomenclature (HSN) code, which is applicable to goods. While HSN codes are used globally for classifying goods, SAC codes focus specifically on services within the Indian taxation framework.

What is the Use of the SAC Code in GST?

A SAC code comprises six digits, and all SAC codes start with the number 99, denoting the chapter for services. The remaining four digits provide a detailed breakdown of the nature of the service being classified. For example, the SAC code 995411 corresponds to general construction services of multi-storied residential buildings, single dwellings, or multi-dwelling.

How is SAC Code Important for Business?

Understanding what SAC code in invoices is holds significant importance in the GST context for several reasons:

Distinct Classification: SAC codes allocate unique codes to different services, giving easy and precise classification.
GST Rate Identification: They assist GST taxpayers in identifying the applicable GST rate for their services.
Compliance Requirement: GST taxpayers must mention the SAC codes, invoices, and returns when registering on the GST portal. This ensures compliance with the tax regulations.
GST Collection Analysis: The allocation of distinct SAC codes to services enables the government to analyse GST collections for each service category. This aids in effective tax administration and revenue management.

How Does the SAC Code Work in GST?

Under GST, a SAC code consists of six digits, with the initial two digits (99) representing the chapter for services. The subsequent four digits provide a detailed breakdown of the major service category and the specific nature of the service. For instance, in the SAC code 995411, "99" represents the chapter for services, "54" denotes the major service category of construction services, and "11" specifies general construction services of buildings.

GST Law Requirements relating to HSN/SAC Code Disclosure in Invoice

Mandatory Disclosure: Under GST law, it is required to disclose the Harmonized System of Nomenclature (HSN) code for goods and the Service Accounting Code (SAC) for services on invoices.
HSN Code: Used to classify goods for taxation purposes based on their nature and characteristics.
SAC Code: Used to classify services for taxation purposes, facilitating uniformity in tax administration.
Compliance: Failure to disclose correct HSN/SAC codes can result in penalties under GST regulations.
Accuracy: Proper disclosure ensures accurate tax calculation and compliance with GST requirements.

Differences between SAC Code and HSN Code with Example

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, adapted by the CBIC for Indian services.	HSN codes are based on WCO’s HSN nomenclature system, used globally for goods classification, with adaptations for India.
Number of Digits	SAC codes comprise 6 digits.	HSN codes consist of 8 digits.
Example	Consider SAC code 995411:	Consider HSN code 64041110:
	- 99: Common code for services.	- 64: Chapter 'Footwear, gaiters, and the like; parts of such articles.'
	- 54: Major service category 'Construction services.'	- 04: Heading 'Footwear with outer soles of rubber, plastics, leather, or composition leather.'
	- 11: Detailed nature of service, 'general construction services of buildings.'	- 11: Subheading 'With uppers of leather.'
		- 10: Further detail specifying 'Sports footwear, tennis shoes, basketball shoes, gym shoes, and the like.'

Benefits of SAC Code in GST

SAC codes offer several benefits in the GST framework:

Easy Identification: The unique codes make identifying and distinguishing various services easy, ensuring clarity in the tax classification process.
GST Rate Clarity: Service providers can quickly determine the applicable GST rate for their services by referencing the SAC code, simplifying invoicing and tax calculation.
Regulatory Compliance: Including SAC codes in GST registration, invoices, and returns ensures businesses comply with the regulatory requirements, reducing the risk of penalties.
Revenue Analysis: The government can analyse GST collections for specific services, aiding in policymaking, revenue forecasting, and efficient tax administration.

Length of SAC Code for GSTR-1 and Invoice

The length of the SAC (Services Accounting Code) varies depending on the annual aggregate turnover of the service provider. According to Notification Number 78/2020, CT(R), dated 10th November 2020:

For service suppliers with an aggregate turnover exceeding Rs. 5 Crore in the previous year:
- All six digits of the SAC code must be furnished for invoices and in the filing of GSTR-1. This regulation came into effect on 1st April 2021.

For service providers with an annual aggregate turnover under Rs. 5 crore:

Supply of Services	SAC Code Requirement
To Registered B2B businesses	4 digits required
To consumers or composition dealers (B2C)	4 digits required (optional)
To unregistered dealers	No SAC code required

Non-compliance with these provisions may result in penalties of Rs. 50,000 under the IGST Act or Rs. 25,000 each under CGST and SGST. These regulations aim to ensure accurate reporting and compliance with GST requirements based on the annual turnover of the service provider.

Also Read: Certificate of Incorporation

Conclusion

The SAC code is an important component of the GST system in India, serving to identify and classify tax services accurately. Its role in facilitating easy compliance, precise tax calculation, and efficient revenue analysis cannot be overstated. Businesses and service providers must familiarise themselves with the SAC code to successfully get through the complex GST scenario.