SAC Code for IT, Software Development & Web Hosting Services

Launching your IT or software company in India is an exciting venture, but navigating the complexities of GST compliance can be a significant challenge. One of the very first questions you’ll face when preparing an invoice is: ‘What is the correct SAC Code for IT services?’ This small but crucial detail is the foundation of your GST compliance. Using the right code ensures you charge the correct tax rate, file accurate returns, and avoid unnecessary legal complications down the line. A Services Accounting Code (SAC) is a classification system developed by the service tax department to categorize all services under the GST regime. For any tech business in India, understanding the specific SAC codes for software development, web hosting, and other IT-related activities is non-negotiable. This guide will walk you through the exact codes you need, explain the applicable GST rates, and show you how to use them correctly to keep your business fully compliant.

What Are SAC Codes and Why Do They Matter for Your IT Business?

Before diving into specific codes, it’s essential to understand what SAC codes are and the vital role they play in the GST framework. Think of a SAC code as a unique identifier for the service you provide. Just as HSN (Harmonized System of Nomenclature) codes classify goods, SAC codes classify services, bringing uniformity to how services are identified and taxed across the country. This system not only helps the government track service-based transactions and revenue but also simplifies the compliance process for businesses like yours. For an IT company, correctly identifying your service—whether it’s custom software development, cloud hosting, or IT consulting—and mapping it to the right SAC code is the first step towards accurate financial reporting and tax payment. Neglecting this can lead to a cascade of issues, from incorrect invoicing that confuses your clients to scrutiny from tax authorities.

The 6-Digit Structure of a SAC Code Explained

Every SAC code follows a logical 6-digit structure that provides a clear classification of the service. This structure is consistent for all services, making it easier to understand once you know the pattern. The code is broken down into three parts:

First two digits (Chapter): These represent the main chapter or heading of the service. For most professional, technical, and business services, including IT, this is 99.
Next two digits (Heading): These narrow down the category within the chapter. For instance, the heading for “Other professional, technical and business services” is 83.
Last two digits (Service Specifics): These final two digits pinpoint the exact nature of the service.

Let’s take the SAC code for IT software development, 998314, as an example:

99: Represents the Chapter for “Professional, Technical and Business Services.”
83: Represents the Heading for “Other professional, technical and business services.”
14: Specifically identifies the service as “Information technology (IT) design and development services.”

Key Reasons to Use the Correct SAC Code

Using the precise SAC code for your IT services is not just a matter of following rules; it has direct and significant benefits for your business operations.

Accurate GST Calculation: The primary purpose of a SAC code is to determine the applicable GST rate. For most IT services, the rate is 18%, but using the wrong code could lead to charging an incorrect rate, creating liability for the deficit or complications in refunding an excess charge.
Proper GST Filing: When you file your monthly or quarterly GST returns (like GSTR-1 and GSTR-3B), you must report your sales with the corresponding SAC codes. Correct codes ensure your returns are accurate and processed smoothly by the GST Network (GSTN).
Seamless Input Tax Credit (ITC): Your business clients need your invoice, with the correct SAC code mentioned, to claim Input Tax Credit on the GST you’ve charged them. An incorrect code can cause their ITC claims to be questioned or rejected, potentially damaging your business relationship.
Avoiding Penalties: The GST department conducts audits and assessments to ensure compliance. Misclassification of services, identified through incorrect SAC codes, can be treated as a willful misstatement or suppression of facts, leading to demand notices, interest, and heavy penalties.

Finding the Correct SAC Code for IT Services & Software Development in India

Identifying the right SAC code is the most critical step. Fortunately, the codes for the information technology sector are well-defined. Most services provided by software companies, developers, and tech consultants fall under a single main chapter, which then branches out into more specific categories. Getting this right ensures your invoices are professional and your tax filings are beyond reproach. Whether you’re a startup in Bangalore or a freelancer in Delhi, these codes apply uniformly across the nation, making compliance consistent regardless of your location.

The Main Chapter for IT Services: SAC 9983

The vast majority of IT and software-related services are classified under the main heading SAC 9983. This heading is broadly titled “Other professional, technical and business services.” Within this, there are several sub-categories that cater specifically to the diverse offerings of the tech industry. When in doubt, you should first look for your service within the sub-headings of 9983. This chapter covers everything from consulting and design to development, hosting, and ongoing management, making it the primary reference point for any tech business operating in India.

SAC Code for Software Development and Customization: 998314

This is one of the most commonly used codes in the tech industry. SAC 998314 is designated for “Information technology (IT) design and development services.” If your business is involved in creating, designing, developing, or customizing software, this is almost certainly the code you need to use. The scope of this code is comprehensive and covers a wide array of activities.

This primary SAC Code for software development services India includes:

Custom software development for specific clients.
Mobile application development (iOS, Android, etc.).
Web application development.
Software design and architecture services.
Programming and coding services.
Software customization and implementation.

Example: Whether you are a freelance app developer or a large firm in Hyderabad providing enterprise software solutions, the SAC Code for software services Hyderabad you’ll use on your invoices for these activities is 998314.

SAC Code for Web Hosting Services and Infrastructure: 998315

For businesses that provide the infrastructure backbone for websites and applications, a different code applies. SAC 998315 is designated for “Hosting and information technology (IT) infrastructure provisioning services.” This code is meant for services that involve providing and managing server space, cloud resources, and related infrastructure. This code directly answers the query for the SAC Code for web hosting services India.

Services covered under this code include:

Shared web hosting.
Dedicated server hosting.
Virtual Private Server (VPS) hosting.
Cloud hosting services (like AWS, Azure, Google Cloud reselling).
Data storage and management services.
Colocation services.

Example: For a business providing SAC Code web hosting Delhi, such as offering shared hosting packages to small businesses or dedicated servers to corporations, 998315 is the designated code for invoicing and GST filing.

Other Important SAC Codes for IT Services

While 998314 and 998315 cover the majority of development and hosting services, the IT industry is vast. Here are a few other important SAC codes that you might need depending on your specific business offerings:

998313 – Information technology (IT) consulting and advisory services: Use this code if your primary service is providing strategic advice, IT roadmaps, system analysis, or technology recommendations to clients without being involved in the actual development or implementation.
998316 – IT infrastructure and network management services: This code is for businesses that manage and maintain a client’s IT infrastructure. This includes network support, cybersecurity management, server maintenance, and helpdesk support services.
998311 – Management consulting and management services: In some niche cases, high-level IT project management or IT strategy consulting that aligns more with business management can fall under this code. However, for most tech-focused consulting, 998313 is more appropriate.

GST Rates and Invoicing Compliance for IT Services

Once you’ve identified the correct SAC code, the next step is to apply the right GST rate and ensure your invoices are fully compliant with GST laws. This is where your theoretical knowledge translates into practical business action. A compliant invoice not only ensures you collect and remit the correct amount of tax but also enables your clients to claim their Input Tax Credit without any friction, which is a hallmark of a professional and reliable business partner.

What is the GST Rate for IT and Software Services?

For the vast majority of IT and software services falling under the SAC 9983 chapter, including software development (998314), hosting (998315), and consulting (998313), the applicable rate of GST is 18%.

This tax is levied in one of two ways, depending on the location of your client:

CGST (Central GST) + SGST (State GST): This applies to intra-state transactions, where your business and your client are located in the same state. The 18% GST is split equally between the Central and State governments.
- Rate: 9% CGST + 9% SGST = 18% Total.
IGST (Integrated GST): This applies to inter-state transactions, where your business and your client are in different states. The entire 18% GST is collected under a single head and goes to the Central Government.
- Rate: 18% IGST.

How to Correctly Display SAC Codes on Your GST Invoice

A GST-compliant invoice has specific mandatory fields. Including the correct SAC code is one of them. Here is a simple checklist to ensure your IT service invoices meet all legal requirements:

Your Details: Your business name, registered address, and Goods and Services Tax Identification Number (GSTIN).
Client’s Details: Your client’s name, address, and GSTIN (if they are a registered business). This is crucial for them to claim ITC.
Invoice Information: A unique, sequential invoice number and the date of issue.
Service Description: A clear and detailed description of the services provided (e.g., “Custom Web Application Development,” “Annual Cloud Hosting Package”).
SAC Code: The correct SAC Code for IT services corresponding to the service provided (e.g., 998314). This should be a separate column in your invoice line items.
Taxable Value: The value of the service before adding any taxes.
GST Breakup: The applicable CGST, SGST, or IGST rates and the corresponding tax amounts shown separately.
Total Value: The final invoice amount, including the taxable value and the total GST.

Recommendation: For official guidelines, notifications, and updates on GST rules and rates, always refer to the official GST Portal.

Conclusion

Mastering GST compliance is a fundamental aspect of running a successful IT business in India. Using the correct SAC Code for IT services is not a mere formality but a critical requirement for accurate taxation, seamless invoicing, and avoiding legal penalties. To recap, the primary codes for the IT sector are 998314 for software design and development and 998315 for hosting and infrastructure services, both of which typically attract an 18% GST rate. Incorrect classification can lead to serious tax disputes and penalties, disrupting your cash flow and business operations. Ensuring every invoice you issue carries the right code is a simple step that protects your business in the long run.

Feeling overwhelmed? Ensuring GST compliance for your IT business doesn’t have to be complicated. The rules can be intricate, and your focus should be on innovation and growth, not tax complexities. Let the experts at TaxRobo handle your GST registration, filing, and advisory needs. Contact us today to ensure your business is 100% compliant, allowing you to code and create with peace of mind!

Frequently Asked Questions (FAQs)

1. What is the difference between a SAC Code and a HSN Code?

SAC (Services Accounting Code) is used to classify services under the GST regime, while HSN (Harmonized System of Nomenclature) is an internationally recognized system used to classify goods. As an IT business, the distinction is important. If you provide software as a service (SaaS), offer custom development, or manage cloud infrastructure, you are providing a service and must use a SAC code. However, if you sell software as an off-the-shelf product on a physical medium like a CD or a pre-loaded device, it is treated as goods, and you would use an HSN code.

2. Do I need a different SAC code if my IT business is in Bangalore?

No, SAC codes are standardized and uniform across all of India. The SAC Code IT services Bangalore is exactly the same as it would be in Mumbai, Hyderabad, or any other city. The classification is based entirely on the nature of the service you provide, not the geographical location of your business or your client. This national standardization is a key feature of the GST system, designed to create a unified market.

3. What is the SAC code for IT annual maintenance contracts (AMC)?

IT Annual Maintenance Contracts (AMC) can sometimes be tricky to classify. Typically, if the service involves repair and maintenance of IT hardware, it may fall under SAC 998739 – Other installation, repair and maintenance services n.e.c. (not elsewhere classified). However, if the AMC is predominantly for software support, updates, and troubleshooting, then SAC 998313 (IT consulting) or SAC 998314 (IT development, which can include support) might be more appropriate. The correct code depends on the dominant nature of the service outlined in the contract. It’s best to consult a professional to determine the exact classification based on your service agreement.

4. What happens if I use the wrong SAC Code?

Using an incorrect SAC code can lead to several negative consequences. First, you might charge the wrong GST rate, leading to a tax shortfall that you would be liable to pay later with interest and penalties. Second, your clients may face issues when claiming Input Tax Credit (ITC), as the service described on the invoice might not match the SAC code provided, causing their claims to be rejected. Finally, it can trigger scrutiny from the GST department during an audit, leading to formal notices and a time-consuming and costly resolution process. It is always better to be precise from the start.

SAC Code IT Services: What You Need to Know?