SAC Code for Banking, Insurance & NBFC Services – Updated Rates
Are you a small business owner paying monthly bank charges or an individual paying an insurance premium? Have you ever wondered about the GST component on your bill and the code mentioned alongside it? Under the Goods and Services Tax (GST) regime in India, every service is classified using a unique Services Accounting Code, or SAC. This system is crucial for correct tax calculation and filing, and understanding the right SAC code for banking, insurance, and NBFC services is mandatory for GST compliance. Using the correct code helps you avoid potential penalties and maintain a clean compliance record. This guide provides a clear SAC code overview for financial services and will break down the specific SAC codes and the latest GST rates you need to know.
What is a SAC Code and Why is it Essential?
Navigating the world of GST can seem complex, but understanding its core components, like the SAC code, makes the process significantly smoother. This simple six-digit code is the backbone of service classification in India, ensuring uniformity and accuracy in tax collection across the nation. For any business dealing with financial institutions, getting this code right on invoices and returns is not just a good practice—it’s a legal requirement that begins with proper GST Registration for Small Businesses.
Understanding the Services Accounting Code (SAC) System
The Services Accounting Code (SAC) is a classification system developed by India’s service tax department to uniformly identify and tax all types of services. It was adopted under the GST framework to streamline the taxation process. Every SAC is a six-digit number with a specific structure that helps categorize the service precisely.
- The first two digits are always ’99’. This universally signifies that the code belongs to a service.
- The next two digits represent the major category of the service. For instance, ’71’ under ’99’ points towards “Financial and related services.”
- The final two digits denote the detailed nature of the service, providing a specific sub-category. For example, ’12’ under ‘9971’ specifies “Deposit Services and Credit Card Services.”
This structured approach ensures that a service like a bank loan is classified under the same code across the country, removing ambiguity and simplifying GST compliance for both businesses and tax authorities. It plays a pivotal role in unifying service classification and ensuring that tax rates are applied consistently.
The Importance of Correct SAC Codes in GST Invoicing and Filing
Using the correct SAC code is not just an administrative formality; it has direct financial and legal implications for your business. The primary function of the SAC code is to determine the exact GST rate applicable to a particular service. When you generate a GST invoice, mentioning the correct SAC code ensures that you charge the right amount of Central GST (CGST), State GST (SGST), or Integrated GST (IGST), a critical component of Understanding GST Invoicing: A Detailed Guide.
This accuracy is essential for filing your GST returns, particularly GSTR-1 (details of outward supplies) and GSTR-3B (a summary of monthly returns). The GST Network (GSTN) uses these codes to verify the tax liability you have declared. For a detailed walkthrough, you can refer to our guide on How to File GST Returns Online: A Step-by-Step Guide of the GST Filing Process & Procedure. Mismatches or incorrect codes can trigger red flags in the system, potentially leading to scrutiny from tax authorities. An incorrect code might result in underpayment or overpayment of taxes, both of which can lead to complications such as interest, penalties, or lengthy refund processes. In short, mastering the use of SAC codes is a fundamental step towards seamless GST compliance and avoiding unnecessary notices.
Detailed List of SAC Codes: Banking, Insurance, and NBFC Services
Financial services are a broad category, and the GST framework provides specific codes to cover most activities performed by banks, insurance companies, and Non-Banking Financial Companies (NBFCs). The majority of these services fall under the main heading 9971, which is dedicated to “Financial and related services.” Below is a breakdown of the most common codes you will encounter.
Key SAC Code for Banking Services India
Banks offer a wide array of services, from basic deposits to complex lending facilities. Each of these activities has a designated SAC code. When you receive a bank statement with GST charges for services like card fees, processing fees, or locker rentals, these codes are used to classify the transaction. The primary banking services SAC code India falls under Heading 9971.
Here are some of the most frequently used codes:
| Service Description | SAC Code |
|---|---|
| Deposit Services, Cheque Clearance, and Credit/Debit Card Services | 997112 |
| Credit Granting Services (e.g., Loans, Advances, Overdrafts) | 997113 |
| Financial Leasing Services | 997114 |
| Other Financial Services (e.g., Locker Rentals, Fund Transfers) | 997119 |
Key SAC Code for Insurance Services India
The insurance sector is another critical component of the financial services industry. Whether it’s a life insurance policy, a health plan, or motor insurance for your business vehicle, each service is categorized under a specific SAC. This ensures that the premium components are taxed correctly.
Here are the primary SAC codes for insurance services:
| Service Description | SAC Code |
|---|---|
| Life Insurance Services (includes various life policies) | 997131 |
| Pension and Annuity Services (related to retirement planning) | 997133 |
| Health Insurance Services | 997134 |
| General Insurance (Motor, Fire, Marine, Accident, Liability) | 997135 / 997136 |
Key SAC Code for NBFC Services India
Non-Banking Financial Companies (NBFCs) play a vital role in providing credit and other financial services, often serving niches that traditional banks may not. Their services, especially those related to lending and asset management, overlap significantly with banks, and therefore, they often use the same SAC codes.
Here are the common SAC codes relevant to NBFCs:
| Service Description | SAC Code |
|---|---|
| Credit Granting Services (e.g., Personal Loans, Business Loans) | 997113 |
| Asset Management Services (including portfolio management) | 997171 |
| Services Auxiliary to Financial Services (e.g., Loan Processing Agents) | 99715 |
Updated GST Rates for Financial Services
One of the most common questions from business owners and individuals is about the GST rate applicable to financial services. Fortunately, the government has kept the rate structure for this sector relatively straightforward, with a standard rate applying to most services.
Standard GST Rate on Banking, Insurance & NBFC Services
The overwhelming majority of financial services provided by banks, insurance companies, and NBFCs attract a standard GST rate of 18%. This rate applies to fees, commissions, and other charges levied by these institutions. For example, the processing fee on a loan, the annual fee on a credit card, or the premium on a general insurance policy will all have an 18% GST component. Understanding the updated SAC rates for banking, insurance, NBFC India is crucial, and as of now, this rate has remained stable. The SAC rates 2023 for banking services India and beyond continue to be pegged at this standard 18%.
Here’s how the 18% GST is broken down:
- Intra-State Transaction: If you and the service provider (e.g., your bank branch) are in the same state, the GST is split into 9% CGST and 9% SGST.
- Inter-State Transaction: If the service is considered to be provided from one state to another, a single 18% IGST is levied.
Important Exemptions and Special Cases
While 18% is the standard rate, not every financial transaction is subject to GST. The government has provided certain exemptions to protect consumers and ensure the affordability of basic financial services. It’s important to be aware of these exceptions:
- Interest on Loans and Deposits: The interest component of an EMI on a loan or the interest earned on a savings account/fixed deposit is exempt from GST. GST is only applicable to other charges like processing fees or late payment fees.
- Services by the Reserve Bank of India (RBI): All services provided by the RBI are exempt from GST.
- Basic Savings Bank Deposit (BSBD) Accounts: Services related to BSBD accounts opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY) are exempt, promoting financial inclusion.
- Sale and Purchase of Foreign Currency: Transactions involving the sale or purchase of foreign currency between banks or authorized dealers are also exempt.
A Practical Guide: How to Find the Right SAC Code
Knowing the importance of SAC codes is one thing, but finding the correct one for a specific service can sometimes be a challenge. Using the official government portal is the most reliable method to ensure you are using the latest and most accurate information.
Step-by-Step: How to Find SAC Code for Banking, Insurance, NBFC
Finding the right SAC code is a straightforward process if you know where to look. The official CBIC-GST portal is the single source of truth for all HSN and SAC codes.
- Visit the Official Website: Go to the CBIC-GST portal, specifically the section for GST rates. You can find it here: GST Goods and Services Rates.
- Navigate to the Services Schedule: On this page, look for the notification related to the rate schedule for services. This document contains the complete list of SAC codes.
- Search for the Service: Once you have the document open, use the search function (Ctrl+F on your computer) and type in relevant keywords like “banking,” “insurance,” “loan,” “credit,” or “deposit.”
- Verify the Description: The search will lead you to the relevant sections. Carefully read the description under the “Description of Service” column to ensure it perfectly matches the service you are invoicing for or accounting for. Select the most specific code available.
Common Mistakes to Avoid
A small error in choosing or mentioning a SAC code can lead to compliance issues. Here are some common pitfalls to watch out for:
- Using a Generic Code: Avoid defaulting to a generic “Other financial services” code (like 997119) when a more specific code (like 997113 for loans) is available. Specificity is key to accurate reporting.
- Forgetting to Mention the Code: Failing to include the SAC code on your GST invoices is a compliance violation. It’s a mandatory field for GST-registered entities, especially those above the turnover threshold.
- Not Staying Updated: GST laws, rates, and classifications can change. It’s crucial to periodically check the official CBIC portal for any amendments or circulars that might affect the financial services sector.
Conclusion
Understanding the framework of the Services Accounting Code is fundamental for any individual or business owner interacting with the financial sector in India. From paying a simple bank fee to processing a major business loan, these six-digit codes are working behind the scenes to ensure taxes are calculated and collected correctly. As we’ve seen, the primary codes for financial services fall under Heading 9971, with a standard GST rate of 18% on most chargeable services. Knowing the specific SAC code for banking, insurance, and NBFC activities is non-negotiable for accurate GST filing, transparent invoicing, and maintaining a healthy compliance record.
Navigating GST can be complex. Don’t let compliance worries slow your business down. TaxRobo’s expert team offers seamless GST registration, filing, and advisory services. Contact us today for a hassle-free consultation!
Frequently Asked Questions (FAQs)
Q1. What is the main SAC code for general banking services in India?
A: The primary banking services SAC code India falls under Heading 9971. For general services like deposits or fund transfers, specific codes like 997112 or 997119 are used. For loans and other credit-granting services, the correct code is 997113.
Q2. Do I need to mention the SAC code on every invoice?
A: Yes, as per GST rules, mentioning the correct HSN/SAC code on tax invoices is mandatory for businesses with an annual turnover above the prescribed limit. However, it is considered a best practice for all GST-registered entities to include it for clarity and proper compliance.
Q3. Is the GST rate for life insurance and general insurance the same?
A: Yes, the GST rate on the taxable value for both life and general insurance is generally 18%. However, the method of calculating the taxable value can differ, especially for life insurance policies. For instance, in some cases, GST is applicable only on the risk premium portion of the total premium paid, not the entire amount.
Q4. Where can I find the official and most updated list of SAC codes?
A: The most reliable and official source is the Central Board of Indirect Taxes and Customs (CBIC) website. You can access the complete GST rate schedule for services, which contains all updated SAC codes and their corresponding descriptions. You can find this information here: Official CBIC-GST Rates Page.
