GST Rate & HSN/SAC Code For Services - Updated For 2022 - Deskera

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All goods and services exchanged in India are categorised as part of the SAC code system or the HSN code system under GST. Goods are categorised using the HSN Code, while services are categorised using the SAC Code. GST rates have been set in five classes called slabs which are predicated on the HSN or SAC codes. These five slabs are: NIL, 5%, 12%, 18%, and 28%.

What is GST and What Are GST Rates

The Goods and Services Tax (GST) is a value-added tax imposed almost on all commodities and services that can be purchased for domestic consumption and used within the country. It is a unified tax structure that eliminates all prior state and central taxes.

GST is the result of combining all central taxes, such as sales tax, excise duty, surcharges, cesses, state VAT, luxury tax, purchase tax, entertainment tax, and so on into a single tax.

The Goods and Services Tax (GST) is a single tax, but given the sheer number of basic commodities and services, they are classified into different GST slabs or have different GST tax rates.

The GST rates are fixed under five slabs:

NIL: No tax is charged on the goods or services used
5 %: Under this tax slab, 5% tax is charged on the goods or services used
12%: Under this tax slab, 12% tax is charged on the goods or services used
18%: Under this tax slab, 18% tax is charged on the goods or services used
28%: Under this tax slab, 28% tax is charged on the goods or services used

Note: Precious metals like gold are exempted and placed under the 3% slab.

What is an HSN code?

The HSN code is an abbreviation for the World Customs Organisation's (WCO) Harmonised System of Nomenclature, which went into effect in 1988. The WCO's primary objective in implementing HSN codes was to define all commodities in a structured manner. It removes ambiguity and facilitates international trade and investment between countries. HSN codes are used for trading over 20,000 items between nations around the globe. WCO uses the revised HSN codes for more than 90% of global trade.

The HSN system is used by more than 200 countries and economies for reasons such as:

Classification that is consistent
Base for their customs tariffs
Statistical compilation of international trade

How does the HSN/SAC code work?

It has approximately 5,000 commodity groups, each of which is defined by a six-digit code and is organised in a judicial and sequential. To ensure constant classification, it is backed by well-defined guidelines.

Since 1971, India has been a part of the World Customs Organisation (WCO). It is used to identify goods for Customs and Central Excise using 6-digit HSN codes. Customs and Central Excise eventually added two extra digits to the HSN codes to make them more accurate, resulting in an 8-digit categorisation.

HSN codes are primarily used by distributors, vendors, suppliers, merchants, and traders. They must either use two-digit, four-digit, or eight-digit HSN codes based on the following parameters.

If the company's annual revenue is less than Rs. 1.5 crores, there is no need to use HSN codes
If the company's annual revenue is between Rs. 1.5 crores and Rs. 5 crores, they must use two-digit HSN codes for all business transactions
If the company's annual revenue exceeds Rs. 5 crores, it must use four-digit HSN codes
Import and export dealings, as well as foreign trades, require the use of 8-digit HSN codes for entrepreneurial ventures

Update for 2021: Notification No. 78/2020 – Central Tax, dated 15.10.2020 has been issued to make HSN code mandatory up to 4 digits in the B2B invoices with effect from 01.04.2021 issued by taxpayers whose aggregate turnover in the preceding financial year is upto Rs. 5 crores. For the taxpayers whose turnover in the preceding financial year is more than Rs. 5 crores, HSN code is mandatory up to 6 digits in invoices with effect from 01.04.2021.

Services Accounting Code (SAC) in GST

The SAC code is a similar concept to the HSN code. SAC stands for Service Accounting Codes, and it is a one-of-a-kind code used in India underneath the GT regime for the identification, evaluation, and taxation of services. As part of it:

The starting two digits, i.e., 99 are the same for all services
The succeeding two digits, i.e., 82), represent the primary nature of the service
The final two digits, i.e., 13 represent the specific nature of the service

Why is HSN and SAC important under GST?

The goal of HSN codes is to make GST more effective and universally accepted. HSN codes will eliminate any need to submit a detailed product description.

The following is a list of a few of the GST service accounting codes. You can find the current GST Rate for service in Chapter 99 of the SAC Codes & GST Rates for Services.

SAC Code	SAC Description
99	All Services
9954	Construction services
995411	Construction services of single dwelling or multi-dwelling or multi-storied residential buildings
995412	Construction services of other residential buildings such as old age homes, homeless shelters, hostels etc
995413	Construction services of industrial buildings such as buildings used for production activities (used for assembly line activities), workshops, storage buildings and other similar industrial buildings
995414	Construction services of commercial buildings such as office buildings, exhibition & marriage halls, malls, hotels, restaurants, airports, rail or road terminals, parking garages, petrol and service stations, theatres and other similar buildings.
995415	Construction services of other non-residential buildings such as educational institutions, hospitals, clinics including veterinary clinics, religious establishments, courts, prisons, museums and other similar buildings
995416	Construction Services of other buildings n.e.c
995419	Services involving Repair, alterations, additions, replacements, renovation, maintenance or remodelling of the buildings covered above.
995421	General construction services of highways, streets, roads, railways and airfield runways, bridges and tunnels
995422	General construction services of harbours, waterways, dams, water mains and lines, irrigation and other waterworks
995423	General construction services of long-distance underground/overland/submarine pipelines, communication and electric power lines (cables); pumping stations and related works; transformer stations and related works.
995424	General construction services of local water & sewage pipelines, electricity and communication cables & related works
995425	General construction services of mines and industrial plants
995426	General Construction services of Power Plants and its related infrastructure
995427	General construction services of outdoor sport and recreation facilities
995428	General construction services of other civil engineering works n.e.c.
995429	Services involving Repair, alterations, additions, replacements, renovation, maintenance or remodelling of the constructions covered above.
995431	Demolition services
995432	Site formation and clearance services including preparation services to make sites ready for subsequent construction work, test drilling & boring & core extraction, digging of trenches.
995433	Excavating and earthmoving services
995434	Water well drilling services and septic system installation services
995435	Other site preparation services n.e.c
995439	Services involving Repair, alterations, additions, replacements, maintenance of the constructions covered above.
995441	Installation, assembly and erection services of prefabricated buildings
995442	Installation, assembly and erection services of other prefabricated structures and constructions
995443	Installation services of all types of street furniture (e.g., bus shelters, benches, telephone booths, public toilets, etc.)
995444	Other assembly and erection services n.e.c.
995449	Services involving Repair, alterations, additions, replacements, maintenance of the constructions covered above.
995451	Pile driving and foundation services

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Conclusion

The goal of HSN codes is to start making GST and GST registration more systematic and universally recognised. HSN codes will eliminate any need to submit a detailed product description. Since GST returns are automated, this will save time and make filing easier.