SAC Code in GST: Full Form, Meaning, List, Benefits, Uses, Importance, How Does It Work

Introduction

Managing taxes correctly is essential for businesses providing services in India, as the Goods and Services Tax (GST) framework requires precise classification of these services. The Service Accounting Code (SAC) system was introduced to standardise how services are identified and taxed under GST. This code helps businesses determine applicable tax rates, maintain compliance, and avoid penalties during audits.

Understanding SAC codes enables service providers to classify their offerings accurately, include the correct codes on invoices, and file GST returns without errors. This guide explains what SAC codes are, how they function within the GST system, and why correct classification matters for businesses of all sizes operating in India.

What is SAC Code?

SAC (Service Accounting Code) is a six-digit identifier used to classify services under GST in India. The system is based on the United Nations Central Product Classification (UNCPC) but has been adapted by the Central Board of Indirect Taxes and Customs (CBIC) to suit Indian tax requirements.

All SAC codes start with 99, which represents the services chapter. The remaining four digits specify the type of service. 

SAC codes serve the same function for services that HSN codes serve for goods. Businesses registered under GST must use the correct SAC code when issuing invoices and filing returns.

Why are SAC Codes Important in GST?

SAC codes serve several functions in the GST system:

• Service Classification Each service type gets a unique code, which eliminates confusion about what is being taxed. This makes it easier for businesses to report their services and for tax authorities to track collections.

• GST Rate Identification Services are taxed at rates ranging from 0% to 28%. The SAC code determines which rate applies. If a service has no assigned code, it defaults to 18%.

• Compliance Requirement Businesses must include SAC codes when registering for GST, on invoices, and in GST returns such as GSTR-1. Missing or incorrect codes can result in penalties.

• Revenue Tracking The government uses SAC codes to analyse tax collections by service category. This data helps with policy decisions and revenue monitoring.

Structure of SAC Code

The SAC code follows a systematic six-digit structure that helps classify services with precision under the GST framework. Every SAC code begins with the number 99, which represents the chapter designated for all services in India. The remaining four digits provide detailed information about the service category and its specific nature.

The structure can be broken down as follows:

First Two Digits (99): These digits are constant across all SAC codes and indicate that the classification pertains to services rather than goods. This universal prefix helps distinguish services from goods, which are classified under HSN codes.

Next Two Digits (Heading): These digits represent the major service category or heading. They group services into broad classifications such as construction, transportation, financial services, or professional services. 

Last Two Digits (Service Code): The final two digits offer a granular description of the specific service within the major category. This detailed classification ensures that each service type is uniquely identified for accurate tax calculation and compliance.

This structured approach simplifies the classification process for businesses and enables tax authorities to track service transactions efficiently. It also ensures that the correct GST rate is applied based on the nature of the service, reducing errors in tax filing and improving compliance.

List of Common SAC Codes

Businesses operating across different sectors must identify the appropriate SAC code for their services to ensure compliance with GST regulations. Below is a list of commonly used SAC codes across various industries:

 
For businesses offering multiple services, it is essential to classify each service under the correct SAC code to avoid misreporting and penalties. Maintaining accurate records of SAC codes used in invoices and returns ensures smooth compliance and reduces the risk of disputes during audits.

How Does SAC Code Work in GST?

SAC codes are used at multiple points in the GST process:

• On Invoices Businesses include the SAC code on every service invoice along with the service description, amount, and GST rate. This tells the client what tax is being charged.

• In GST Returns When filing GSTR-1, businesses report their services using SAC codes. The code links each transaction to its service type and tax rate.

• For Tax Calculation The SAC code determines the GST rate. If a business provides IT service, goods transport, the rate could be decided depending on conditions.

• Default Rate If a service has no specific SAC code assigned, the default GST rate is 18%.

Benefits of Using Correct SAC Codes

Using the correct SAC code offers several advantages for businesses operating under the GST framework. The table below outlines the key benefits:

How to Find the Right SAC Code

Identifying the correct SAC code for a service is crucial for accurate GST compliance and filing. Businesses can follow these steps to locate the appropriate code:

Step 1: Identify the Nature of the Service The first step is to clearly define the service being provided. Businesses must determine whether the service falls under categories such as construction, transportation, consultancy, information technology, or professional services. 

Step 2: Access the Official GST Portal The Central Board of Indirect Taxes and Customs (CBIC) provides an official search tool on the GST portal. Businesses can visit the portal and navigate to the HSN/SAC code search section. 

Step 3: Use the Search Functionality Once on the portal, users can enter keywords related to their service in the search bar. For instance, entering terms like "software development" or "legal services" will generate a list of relevant SAC codes with their descriptions. 

Step 4: Cross-Check with Official Notifications The GST Council periodically issues notifications and updates to SAC codes and tax rates. Businesses should refer to the latest notifications available on the GST portal or consult official circulars to ensure they are using the most current code for their service.

Step 5: Consult a Tax Professional if Uncertain In cases where the service does not clearly fit into a specific category or involves multiple service components, it is advisable to consult a chartered accountant or GST practitioner. 

Step 6: Maintain Updated Records Once the correct SAC code is identified, businesses must maintain consistent records across all invoices, GSTR-1 filings, and tax returns. Regular audits of SAC code usage help identify discrepancies and ensure ongoing compliance with GST regulations.

How to Find My GST SAC Code

Businesses can locate their GST SAC code through the following methods:

Method 1: GST Portal Search The official GST portal provides a dedicated search tool for HSN and SAC codes. Visit the GST portal and navigate to the "Search HSN/SAC Code" section. Enter keywords describing the service, such as "legal services" or "software development," and the portal displays matching codes with official descriptions. This is the most reliable method as it uses government-verified data.

Method 2: Consult a Tax Professional For complex services or businesses offering multiple service types, consulting a chartered accountant or GST practitioner is advisable. Tax professionals can review the business activities and recommend the most appropriate codes based on current regulations. This method is particularly useful when services do not fit clearly into existing categories or when interpretation of service descriptions is required.

If a service has no assigned code, the default GST rate of 18% applies. Businesses should document this classification and be prepared to justify it if questioned during audits.

SAC Code vs. HSN Code

Conclusion

SAC codes classify services for GST purposes in India. Every service has a six-digit code that determines the applicable tax rate and ensures compliance. Businesses must include the correct SAC code on invoices and in GST returns.

The code structure is simple: 99 for services, followed by a two-digit heading for the service category, and two digits for the specific service type. Incorrect or missing codes can result in penalties, so businesses should verify their codes using the GST portal or consult tax professionals.

Key points:

• SAC codes are mandatory for GST-registered businesses

• They determine GST rates and ensure accurate reporting

• Codes must appear on invoices and in GSTR-1 filings

• Businesses with turnover above ₹5 crore must use all six digits

Using the correct SAC code simplifies compliance and reduces the risk of disputes during audits.