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April 14, 2025

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

All banks, insurance firms, investment companies, and financial advisors in India are classified as financial service providers and are required to adhere to GST (Goods and Services Tax) compliances.

GST assigns SAC Codes (Service Accounting Codes) to services, which aids in determining appropriate tax brackets and reporting. One of the most propelling SAC codes in the finance world is 9971.

After reading this guide, you will fully understand SAC Code 9971, its subcategories, GST rates, and methods for safeguarding tax compliance.

What is SAC Code 9971?

SAC Code 9971 refers to Financial and Related Services under the GST classification. It is specially dedicated to businesses providing services related to banking, finance, insurance, investment, loans, credit, or advisory in financial matters.

This code ensures that every financial service gets a standardised treatment in GST taxation.

Classification of SAC Code 9971

SAC Code 9971 is further divided into specific service sub-categories:

9971.10 - Banking and Financial Services

Includes:

Services Related to Accounts and Deposit

Loans and Advances

Cash Credit and Overdraft

Credit and Debit Card Issuance

Fund Transfer Services

Automated Teller Machines (ATM) Services

9971.20 - Insurance and Pension Services

Includes:

Life Insurance

Health Insurance

General Insurance

Pension Fund Services

9971.30 - Investment & Brokerage Services

Includes:

Mutual Fund Advisory

Stock Broking

Wealth Management

Portfolio Management Services

9971.40 - Financial Leasing Services

Includes:

Leasing of Financial Assets

Leasing Equipment with Ownership Option

Lease Transactions with Financial Involvement

9971.90 - Other Financial Services

Includes:

Credit Rating Services

Financial Consultancy

Risk Assessment

Treasury Services

Loan Recovery Assistance

Payment Gateway Services

GST Rates Applicable on SAC Code 9971

Correct GST rates depend on the exact nature of the financial service. Here's a breakdown of rates applicable to each type:

1. RBI Services – GST Exempt

All services provided directly by the Reserve Bank of India (RBI) are fully exempt from GST.

2. Interest Income on Loans – GST Exempt

If a financial institution earns income purely from:

Loan Interest

Advances Interest

Deposits Interest

And if this income is not linked to credit card services, then GST is not applicable.

3. Life Insurance – Partially Exempt or 18% GST

Life Insurance GST varies depending on the product:

Pure Life Insurance Premium: 18% GST

Investment-Linked Insurance: Only Risk Portion Taxed at 18%

National Pension Scheme (NPS): GST Exempt

4. Health or General Insurance – 18% GST

All types of health, motor, travel, property, or liability insurance services are 18% GST.

5. Banking & Financial Services – 18% GST

Most of the banking services come under 18% GST slab, including:

Account Maintenance Charges

ATM Services

Fund Transfer

Card Charges

Loan Processing Fee

6. Stock Broking & Investment Advisory – 18% GST

This includes:

Brokerage Fee

Investment Advisory Fee

Portfolio Management Fee

All attract GST at 18%.

7. Credit Card Interest – 18% GST

If interest or late fees on credit card dues are charged, it is treated as service income and attract 18% GST.

Importance of Correct SAC Code Usage in Financial Services

Applying the correct SAC Code in GST returns is crucial for:

Ensuring accurate tax filing.

Avoiding penalties or audit objections.

Smooth input tax credit claims.

Transparent invoicing to customers.

Maintaining proper compliance records

How to Identify the Correct SAC Code?

The outlined steps to assist in choosing the correct SAC Code:

Examine the service offered

Description comparison of listed subcategories of SAC 9971

Correctly input GST rate

Recall SAC Code on invoice

Claim SAC Code in GST tax returns

GST Compliance Tips for Financial Service Providers

Make sure to keep up with all the latest GST notifications

Maintain all invoices clean with the exact SAC code & GST rate

Monitor exempt vs taxable financial incomes meticulously

Keep precise records for every transaction

File for GST returns consistently and accurately

Check that GST registration is valid and operational

Reconcile input tax credits with caution

Challenges Faced in Financial Services GST

Financial service providers still face difficulties about the following, even after classification has been made:

Differentiation of interest and service charges

Taxes about Penal Charges

Difficulties with composite and mixed supply

Advisory versus execution services interpretive difficulties

Exemption rule changes from time to time

These problems require a consultation with tax authorities more often than required.

Recent Updates on Financial Services GST in India

Clarification has been provided for GST on penal interest and delayed payment charges.

Services related to advisory and management continue to fall under the 18% slab.

Services related to digital payments & Fintech are included under SAC 9971.90.

Services of RBI, pure interest on loans, and NPS linked schemes remain GST-free.

Key Takeaways for Financial Sector Businesses

Every financial service offer must have SAC Code 9971 registered.

The proper classification of services ensures compliance with the Goods and Services Tax law, or GST.

The majority of financial service companies are subject to an 18% tax on their goods and services.

Banking services offered by non-financial institutions, excluding credit cards, are not liable for tax.

Invoices issued for services rendered with the SAC code must state the relevant SAC code.

All invoice listings under GST must pertain to the service rendered under SAC Code 9971.

Conclusion

Like all other financial services with GST in India, SAC Code 9971 serves as an identity code. Regardless of whether you are a banker or an insurer, a stock broker or an investment advisor, or even a fintech startup, compliance with SAC Code 9971 is mandatory

As payment services diversify in India, their GST classification under SAC Code 9971 will be essential for hassle-free operations and will assist in remaining tax compliant, legally silent, and transparent in operational business."

FAQs

Q1. What is SAC Code 9971 used for?

Classifying all financial services like banking, insurance, loans, investment and consultancy under GST is captured under SAC Code 9971.

Q2. What is the GST rate for financial services under SAC 9971?

Like most financial services, Pure interest income on loans and RBI services have an exempt status, which means they are not subject to an 18% Goods and Service Tax (GST).

Q3. Is loan interest taxable under GST?

Income derived from loan interest (excluding credit cards) is not liable under Goods and Services Tax if it is strictly interest earned on loans and deposits.

Q4. Are insurance services taxable under GST?

Correct, all insurers are mandatorily charging 18% GST on insurance services except for some government-related pension schemes such as NPS, which is tax-exempt.

Q5. Is it mandatory to mention the SAC Code on the invoice?

Indeed, following GST protocols, all providers of financial services should capture the appropriate SAC Code on their GST invoices.

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