GST on Services: SAC Codes, Rates & Exemptions Guide

GST on services is governed by the Services Accounting Code (SAC) system — a classification framework that determines the applicable GST rate for every type of service. Getting the SAC code wrong means charging the wrong rate, which can result in demand notices, interest, and penalties.

This guide explains how SAC codes work, the applicable GST rates for common services, and key exemptions you should know.

SAC (Services Accounting Code) is a 6-digit classification system developed by the Central Board of Indirect Taxes and Customs (CBIC) to classify services under GST. It is the services equivalent of HSN codes for goods.

Structure of SAC codes:

• First 2 digits: 99 (all services start with 99)
• Next 2 digits: Service category (e.g., 9954 for construction services)
• Last 2 digits: Specific service type

Example: SAC 998311 = Management consulting services

Services are taxed at one of five GST rates:

The following services are fully exempt from GST:

• Services by hospitals, clinics, and doctors (allopathy, Ayurveda, Unani, Siddha, Homeopathy)
• Ambulance services
• Blood banks
• Veterinary services

• Pre-school, school, and college education
• Services by educational institutions to students, faculty, and staff
• Mid-day meal scheme services

• Agricultural operations (cultivation, harvesting, threshing)
• Supply of farm labour
• Warehousing of agricultural produce
• Services by APMC

• Services by the Central/State Government (except commercial activities)
• Services by local authorities
• Postal services by the Department of Posts (basic services)

• Services by religious trusts
• Services by charitable organisations registered under Section 12AA/12AB

• Interest on loans and deposits (but processing fees are taxable)
• Foreign exchange conversion (margin-based)
• Life insurance (term plans — pure risk cover)

Under RCM, the recipient of the service pays GST instead of the supplier. Key RCM services:

1. Identify the nature of your service — be specific (e.g., "software development" not just "IT services")
2. Search the CBIC SAC code list at cbic-gst.gov.in
3. Check the GST rate notification — Notification No. 11/2017-CT(Rate) for services
4. Verify with a CA if the service falls in multiple categories or if the rate is unclear

• Using HSN codes for services: HSN is for goods; SAC is for services. Using the wrong code type is a compliance error.
• Applying the wrong rate for mixed supplies: If a supply involves both goods and services, determine whether it is a composite supply or mixed supply — the tax treatment differs.
• Ignoring RCM obligations: Many businesses miss RCM on GTA, legal services, and director remuneration.
• Incorrect SAC for construction: The rate varies significantly based on the type of construction and whether ITC is availed.

Our GST team helps service businesses:

• Determine correct SAC codes and applicable rates
• Structure service agreements for GST efficiency
• Handle RCM compliance and ITC reconciliation
• Respond to GST notices related to rate classification
• File accurate GSTR-1 and GSTR-3B returns

Contact us at [email protected] or WhatsApp +91 92172 31472.

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Consult a qualified CA for advice specific to your situation.