Business, national or global, is an ever-growing network of traders and consumers involved in the trade of many products and services. Without proper organisational tools, a business can go berserk. Thus, to streamline trade, product classification codes like HSN and SAC are the most practical measures to be taken by the government.
What is SAC Code?
SAC is the acronym for Services and Accounting Code. This is a close cousin of the Harmonised System of Nomenclature or HSN code. It serves to classify and codify products/ services in worldwide trade. This internationally recognised coding system is necessary for all service providers/ business owners while filing GSTR.
The SAC system of classification of services is devised by the Central Board of Indirect Taxes and Customs (CBIC). They help identify taxes and GST rates for calculating tax liability. They are based on the HSN code, the internationally recognised system of classifying goods and services.
Difference Between SAC Code and HSN Code
The Goods and Services Tax (GST) laws came to be implemented in India in July 2017. Under the GST laws, all goods and services are meant to be coded with SAC and HSN numbers for the purpose of classification. While HSN code is intended for goods, SAC code is used to classify different services.
Another difference lies in the number of digits. While HSN code may have 4-, 6- and 8-digit codes depending on the nature of the business or the product in question, the SAC code is always of six digits.
How Does the SAC Code Work: Examples
The SAC code is a 6-digit code, where each digit stands for specific criteria of classification:
- The first two digits in SAC stand for the service and it is the same for all services (99)
- The middle two digits stand for the specialised category of the service, for instance, IT, transport, food preparation, etc.
- The last two digits represent the finer details of the service i.e. what exactly it caters to. For instance- designing, maintenance, technical support or any other specialised service.
Benefits of SAC Codes
- They help business owners identify the appropriate GST rates for tax filing.
- These codes make finding specific goods and services much easier from the plethora of goods and services available.
- They help streamline the taxation process and control tax malpractices.
- Keeping close track of the data analytics of international trade
- Systematic cataloguing of services
The SAC code for catering services on flights, trains is 99 63 35. If we break it up and analyse it, we will see that:
- 99 stands for services
- 63 for the specific main category, i.e., catering services
- 35 stands for the specific nature/ subcategory of the main category, i.e., catering services for trains, flights, etc.
Let us look into another example of SAC code 99 54 11 and break it up to understand:
The last two digits vary under the main category of service to denote different subcategories.
The Use of SAC Codes: Government Guidelines
Chapter 99 of the HSN module contains all the information about SAC coding. It explains all about the services to which it is related and how to identify the SAC code of different services. SAC codes are mandatory for filing GST returns and issuing trade invoices.
As per the government declaration in October 2020, HSN and SAC codes are made mandatory on tax invoices from 1st April 2021. As per this regulation, businesses with an aggregate turnover above 1.5 crore INR in a financial year must furnish the SAC code on service invoices. However, businesses with an aggregate turnover below 1.5 crores are not legally obligated to furnish SAC codes.
In case of violation of these laws, these consequences may follow:
- An invoice with no mention or incorrect mention of the SAC code will be treated as invalid
- As per section 31 of the tax laws, the buyer cannot claim an input tax credit in the absence of HSN/ SAC codes on the invoices.
- As per section 125 of the CGST Act, incorrect invoicing incurs a penalty of Rs. 25, 000
With a surge of new rules and regulations and revisions of the existing ones, maintaining business transactions and staying updated in taxation details can be problematic. Fintech solutions like Imprezz work on this pain point of large and small businesses. Imprezz provides services like invoicing, tax-related document management, real-time tracking of transactions and payment reminders.
The services provided by Imprezz cater to several aspects of financial management of your business:
- Saves the expenses on the workforce to be hired for account management
- Hassle-free financial operations save time
- Higher accuracy level than manual financial management
- Data security
- Easy access of all financial information from anywhere any time
Easy SAC Code Invoicing with Imprezz
The Ministry of Finance has mandated the integration of SAC coding in your tax invoices from April 2021. This means a business owner/ service provider cannot afford to miss out on including this code on their tax invoices.
So, to avoid all the hazards of doing it manually, switch to Imprezz for an absolute error-free billing solution. All you have to do is open a new invoice template and put all your information. Information like company logo, business address, consumer’s address, contact details, etc. Further, enter the services’ details, pricing, taxation rate, and GST details with SAC codes specific to that service. Finally, put your digital signature and click on the finish button to complete the process.
Instead of running around in different directions, walk straight up to Imprezz for the one-stop solution to your business’s financial management requirements in keeping with the latest government regulations.