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Published on:

January 13, 2025

Alankar Mishra

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Basics of GST

Financial Services GST Rate & SAC Code 9971: A Quick Guide

Goods and Services Tax GST has brought ease to taxation in India and is bearing fruits in aspects such as the financial services industry. Financial service providers getting involved with Indian clients must deal with a set of complexities concerning GST rates and the SAC Services Accounting Code. This guide delves into the intricacies of the GST rate and SAC code 9971 concerned with financial services and its implications.

What Is SAC Code 9971?

Under GST, the services accounting code specifically set for financial services is the SAC Code 9971. SAC codes serve the same purpose as HSN codes, except they are specific to services, which is meant to facilitate compliance. They include services rendered by banks, insurers, mutual funds and the like.

GST Rate on Financial Services

The general services charge rate on almost all financial instruments under the SAC code of nine nine seven one provided on the service is at 18%. This rate further extends to:

Services of Banks (account management, movement of funds, etc)

Fees for loan processing

Advisory services in Finance

Services under Insurance, with some few exclusions

Breakdown of SAC Code 9971

SAC Code 9971 has the following subsets:

SAC Code	Category	Examples of Services	GST Rate
99711	Banking and Financial Services	Account servicing fees, ATM transactions, loan processing fees	18%
99712	Insurance Services	Life insurance, general insurance, reinsurance	18%
99713	Investment and Advisory Services	Portfolio management, financial advisory	18%

Key Inclusions Under SAC Code 9971

1. Banking Services:

GST applies to the following services offered by the bank:

Account servicing and maintenance Fees

ATM Transactions

Loans and their processing fees

2. Insurance Services: For all insurance policies whether life or general GST is charged on the premium except in instances such as government policies.

3. Financial Advisory: Life insurance premiums get an 18% GST markup on investment and purchase from a portfolio manager.

‍GST Exemptions in Financial Services

Service Type	GST Applicability
Interest on loans and borrowing	Exempt
Services by Reserve Bank of India (RBI)	Exempt
Pradhan Mantri Fasal Bima Yojana (Crop Insurance)	Exempt

Importance of SAC Code 9971

1. Ease of Compliance: It aids enterprises as well as GST officials in service categorization and valuation tax processes.

2. Uniformity: Guarantees and establishes uniform tax structures around different financial service institutions.

3. Transparency: Illustrate the scope of the tax for businesses and consumers.

How to Calculate GST on Financial Services

Determine the service availed under SAC Code 9971.

Examine whether or not the service is subject to GST (some exemptions do apply).

Determine the taxable amount and apply the GST (at the rate of 18%).

Challenges in GST for Financial Services

1. Recruiters Differentiation Trouble: The classification for SAC subcategories can be greatly classified for service industry providers.

2. Awareness Gap: Customers usually are not very clear regarding the extent of GST applicable to the financial service providers.

3. Higher Consumer Costs: GST on financial services is a great cost to the end consumers.

Tips for GST Compliance in Financial Services

1. File GST With Correct Codes: Ensure that you are using the right codes when filing your GST returns.

2. Log GST transactions: Ensure that a breakdown of taxable and exempt services and sales is recorded.

3. Inform Users: Make sure that users are aware of regulations on GST compliance to prevent arguments from arising.

Conclusion

The comprehension of the 9971 SAC Code along with the 18 per cent GST rate on financial services is important from both the consumers' and the business's perspectives. This classification does streamline taxation and ensures adherence, however, it also comes with the need for better demarcation and precise application. Communication is key, so financial service providers can manage compliance under GST rules and regulations satisfactorily while retaining confidentiality and functionality.

FAQs

1. What is the GST rate for HSN code 9971?

The HSN code 9971 which includes financial services attracts a general GST rate of 18%

2. What is the SAC code for bank charges?

The SAC code for bank charges is 9971 and is classified under the financial services tax category.

3. What is the HSN code for brokerage services?

HSN or SAC Codes for brokerage services is 997152 which includes stockbroking and other intermediation services.

4. What does HSN code 9971 include?

Services like Banking, Stock Broking, as well as Banks and Insurance Intermediaries, come under HSN code 9971.

5. What is the GST rate for insurance services under HSN code 9971?

The insurance service segment attracts an 18% GST except for a few life and health insurance policies which are provided at a lower cost or have tax exemptions.

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