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.

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.

Also Read: Certificate of Incorporation

Frequently Asked Questions (FAQs)

1.)Is mentioning the SAC code in the invoice mandatory?

Yes, mentioning the Service Accounting Code (SAC) in the invoice for services provided under the Goods and Services Tax (GST) regime is mandatory. It helps in the proper classification and taxation of services.

2.)Who Can Use SAC Codes?

Any individual or entity providing taxable services under the GST regime must use Service Accounting Codes (SAC codes) to classify and tax their services correctly. This includes businesses, professionals, and service providers registered under GST.

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.