All tax invoices generated by the suppliers of goods and services under GST law must include the appropriate HSN code or SAC code. The SAC code is the "Service Accounting Code" and was first established by the Service tax department. Later, GST also adopted SAC. However, both apply to website and software development services.
SAC (Service accounting code), levied on services, was initially established by the Service Tax Department. Now, SAC also comes under GST. However, it differs from an HSN code as all services typically start with 99, and 18% of GST applies to website and software development services.
Group 99831 of the SAC codes deals with management consulting and management services or information technology services, including website and software development. Website and software development comes under the SAC code 998314 for the category of Information technology (IT) design and development services. The SAC codes allotted for the various services are as follows:
| Group 99831 | Management consulting/Services; Information technology services |
| 998311 | Services including financial, human resources, strategic operations, marketing and supply chains, etc. |
| 998312 | Business consulting services – Public relations services |
| 998313 | IT (Information Technology) consulting and support services |
| 998314 | IT design and development services |
| 998315 | Hosting and IT infrastructure provisioning services |
| 998316 | Network management and IT infrastructure |
| 998319 | Other IT services |
How Are SAC Codes Derived
The Service Accounting Code is generated using a standard format. For services, the first two numbers are always 99. Therefore, the main service type in this example, Other professional, technical, and business services, is represented by the next two figures, 83.
The next two digits, 14, stand for the specific type of service, for example, design and development services for information technology (IT).
What Does SAC code- 998314 Include?
The SAC code 998314 for the category of Information technology (IT) design and development services includes the following:
- Provides technical know-how to create or construct an IT solution, including specialized programs, networks, and computer systems.
- Services that create the framework or write the computer code required to create or implement a software application. For example, designing a webpage, database, etc.
- Network security design and development services, such as designing, developing, and implementing software, hardware, and procedures to control access to data and programs and to enable the secure exchange of information over a network, such as intranets, extranets, and virtual private networks.
- Services determining a company’s computer needs, offering advice on hardware and software purchases, creating system specifications, and installing the new system are there in the 998314 SAC Code
- Services, such as an evaluation of the client’s current computer system, current and future computing needs, the acquisition of new hardware and software, and the fusion of the new and old system components to produce a new integrated system are also a part of 998314 SAC Code
- The original software may be licensed as intellectual property and protected as a collection of instructions to be utilized in a computing system to achieve a certain effect. Make Quick Online GST Account Login from the User Friendly Portal.
What Does 998314 SAC Code Not Include?
- Web page hosting agreements that include both the design and development of the web page: – 998315.
- Service agreements that combine application design and development with ongoing hosting and administration of the application: – 998315.
- Software services for retail and wholesale sales: 996111, 996211
- Contracts for services where the hosting and continuous operation of the application are included with the design and development of the application: – 998315.
- The daily network management services for the client’s network: – 998316.
SAC Code for Technology Consulting Services
When just technical consulting services are offered, and software development or design is excluded, then social media marketing firms, freelancers, digital marketing agencies, and SEO agencies use SAC Code 998313 to bill for their services. The GST Tax rate applied to Technology Consulting Services is 18%.
What Is Included in 998313 SAC Code?
The SAC code 998313 is for information technology (IT) consulting and support services under the Goods and Service Tax categorization. This type of service is taken as other corporate, technical, and professional services, and they include the following:
- Provide guidance or a professional opinion to the clients on technical issues relating to the use of information technology, such as guidance on hardware and software requirements and procurement, systems integration, systems security, or the provision of expert testimony on IT-related issues.
- Provide backup computer equipment and duplicate software in a different location to enable a client to relocate regular staff to resume and maintain routine computerized operations in the event of a disaster like a fire or a flood.
- Provides technical expertise to help a client with specific computer-related issues such as auditing, assessing, and documenting a server, network, or process for components, capabilities, performance, or security.
- Provides technical expertise to solve issues with the software, hardware or an entire computer system.
What Does SAC Code 998313 Not Include?
- Giving suggestions, direction, and operational help regarding how firms employ information technology, such as creating an e-commerce strategy: – 998311
- Consulting the relevant information technology (IT) design and development service under service agreements where guidance combines with the design and development of an IT solution – 998314 SAC Code
Breaking up of SAC Codes
The SAC (Services Accounting Code) is a 6-digit code used to classify services for invoicing and taxation purposes under the GST (Goods and Services Tax) system in India. The first two digits of the SAC are always “99,” the next two digits represent the major nature of the service, and the last two digits represent the detailed nature of the service. For example, SAC code 9954 is broken down as follows:
99: Common for all services
54: General construction services
Each specific type of service is further classified under the detailed nature of the service.
For instance, SAC Code 995428 represents “General construction services of other civil engineering works n.e.c.,” and SAC Code 995429 represents “Services involving Repair, alterations, additions, replacements, renovation, maintenance or remodelling of the constructions covered above”
What is the Difference between SAC and HSN Codes?
The SAC (Services Accounting Code) and HSN (Harmonized System of Nomenclature) codes are both classification systems used for tax purposes under the Goods and Services Tax (GST) in India. Here are the key differences between SAC and HSN codes:
-
Nature of Classification:
– SAC code is used to classify services.
– HSN code is used to classify goods.
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Number of Digits:
– SAC code has six digits.
– HSN code has eight digits.
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Structure:
– SAC Code Structure:
– First two digits: Major service category
– Next two digits: Specific service
– Final two digits: Sub-service
– HSN Code Structure:
– First two digits: Chapter
– Next two digits: Heading
– Next two digits: Subheading
– Final two digits: Product code
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Example:
– For a service like software development:
– SAC Code: 998314
– First two digits (99): Information Technology (major service category)
– Next two digits (83): Software development (specific service)
– Final two digits (14): Custom software development (sub-service)
– For a product like a mobile phone:
– HSN Code: 8517.12.00
– First two digits (85): Electrical machinery and equipment (chapter)
– Next two digits (17): Telephone sets (heading)
– Next two digits (12): Mobile phones (subheading)
– Final two digits (00): Product code
Understanding and correctly applying SAC and HSN codes are essential for businesses to comply with GST regulations and ensure accurate tax reporting for services and goods, respectively.
Benefits of SAC Code & HSN Codes for the Businesses in India
The use of SAC (Services Accounting Code) and HSN (Harmonized System of Nomenclature) codes provides several benefits for businesses in India, especially under the Goods and Services Tax (GST) regime. Here are the key advantages:
Benefits of SAC Code (for Services):
-
GST Compliance:
– SAC codes ensure that businesses comply with GST regulations by accurately classifying and reporting their services. This is essential for fulfilling tax obligations.
-
Uniform Classification:
– SAC codes create a standardized system for the classification of services, promoting uniformity and clarity in the identification of different types of services.
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Ease of Documentation:
– Proper use of SAC codes simplifies documentation for businesses, making it easier to prepare invoices, file GST returns, and maintain financial records.
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Reduced Tax Disputes:
– Accurate classification using SAC codes helps in reducing tax disputes, as businesses can demonstrate clear adherence to GST guidelines in their service transactions.
Benefits of HSN Code (for Goods):
-
Clear Product Identification:
– HSN codes provide a systematic and globally recognized way to identify goods. This clarity aids in preventing confusion and ensuring accurate classification of products.
-
Smooth International Trade:
– For businesses involved in international trade, HSN codes facilitate smoother transactions by providing a common language for identifying products, making it easier to comply with customs and trade regulations.
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Accurate Tax Calculation:
– The use of HSN codes simplifies tax calculations for goods, helping businesses accurately determine the applicable GST rates based on the specific product category.
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Reduced Errors and Disputes:
– HSN codes contribute to minimizing errors and disputes related to the classification of goods, which can arise during transactions and audits.
-
Efficient Inventory Management:
– Businesses can streamline inventory management processes by using HSN codes, making it easier to track and manage stock levels for different products.
| If you are looking for information on HSN code for digital marketing, HSN code for IT services, SAC code for IT services, software services SAC code, or HSN for IT services, Vakilsearch can provide you with expert guidance. As a leading provider of legal and business solutions, Vakilsearch has a team of experienced professionals who can assist you with all your HSN and SAC code related queries. |
HSN Code for Software
Software development is viewed as a service if the process is carried out and provided as a service, such as through the SAAS model. Selling software when the developer has finished developing it and makes it available on a CD, DVD, or USB device is seen as the delivery of products.
The HSN code (Harmonized System of Nomenclature code) must be included on the tax invoice in this situation since the SAC code is not relevant. For the services under 998314 SAC Code, the HSN Code Check for those services will be the same; for example, the digital marketing HSN code and social media marketing services HSN code will be 998314.
Conclusion:
Under the GST act, all tax invoices from suppliers of goods and services must include the proper HSN or SAC code. The SAC code is the “Service Accounting Code” and was first established by the service tax department. Later, GST adopted SAC; both apply to website and software development services.
The SAC code for website and software development is 998314, which deals with management consulting or information technology services, including website and software development.
Many services come under a particular SAC code. However, there are other services as well which are not a part of a particular SAC code. In some software development cases, an appropriate HSN code must be mentioned in the tax invoices where SAC codes might seem invalid for certain services.
Therefore, understanding all SAC codes is necessary to ensure compliance with the GST act. To know more about SAC codes for goods and services, speak to an expert at Vakilsearch and get all the valuable insights on GST compliance.
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