SAC Code for Software Development and IT Services

Software development and IT services fall under heading 9983 — other professional, technical and business services — within group 99831, which covers information technology design and development services, with 998313 specifically for IT consulting and support. That is the practical answer for most invoices. What makes this topic harder than a lookup, though, is that software sits awkwardly across the goods-versus-services line, and getting that boundary wrong upstream means the SAC you eventually pick is defending the wrong classification.

The code, in short

Group 99831, "Information technology (IT) design and development services", sits inside heading 9983 and is the home for most software work billed as a service: application development, systems design, programming, testing and IT consulting. Within that group, 998313 covers IT consulting and support services, while adjoining codes in the same group cover design and development, hosting and infrastructure provisioning, and infrastructure and network management. Our SAC code reference sets out the wider structure of Chapter 99 if you need the full list rather than just the IT corner of it, and our guide to consultancy SAC codes covers how the neighbouring 9983 codes for management and business consulting are picked.

That single answer, however, only covers the case where the engagement is unambiguously a service — someone building or supporting software for a fee. Two other fact patterns are common enough in this sector that they deserve their own sections: whether the thing you are supplying is a good at all, and whether a licence fee is really a 9983 service or a 9973 leasing transaction.

Custom software, packaged software: goods or service?

This is the genuinely hard question in software classification, and it is worth stating plainly rather than papering over: the same word, "software", can be a good or a service depending on how it is developed, delivered and licensed, and the two framings carry different codes, different place-of-supply rules and, in principle, different rate treatment.

The accepted position treats the development of customised software for a specific client, and the temporary or permanent transfer of intellectual property rights in software, as a supply of services. The substance of what is being paid for is engineering effort and a right to use the output, not a physical or downloadable object changing hands. This is why bespoke application development, custom integrations and client-specific configuration work are coded within 9983 rather than treated as a sale of goods.

Pre-packaged, off-the-shelf software — a shrink-wrapped product supplied on physical media, or a standard download of the same product sold to any buyer without client-specific modification — has been treated as a good under HSN 8523 (discs, tapes and other media for recording, and by extension standardised software products) in certain contexts, particularly where the transaction looks like an outright sale of a standard product rather than a development engagement or a revocable licence. Other framings license the same product as a service instead, on the reasoning that the buyer is acquiring a right to use rather than ownership of a copy.

The practical takeaway is not a single rule you can apply mechanically. It is that the answer depends on the facts of the transaction: is the software built for this client or sold identically to everyone; is it delivered as a physical or downloadable copy or accessed remotely; does the agreement transfer a right to use, a licence, or an assignment of IP; and is the price a one-off sale price or a recurring fee for continued access. Read your contract before you code the invoice, and treat this as one of the areas where two competent people can reasonably classify the same product differently depending on how it is actually sold.

Licensing under heading 9973

Heading 9973 covers leasing or rental services without an operator, and it includes licensing services for the right to use intellectual property and similar products — a category that software licensing can fall into. This sits apart from 9983, which is built around the supply of the development or consulting effort itself.

The distinction that matters in practice is what the payment is actually for. A fee paid for a developer to build or customise software is development work and belongs in 9983. A fee paid for the right to continue using software someone else already built — where no development effort is being purchased, only a right of use — sits more naturally under 9973 as a licensing arrangement. Between those two poles, the way the licence is structured changes the characterisation:

• Perpetual licence — a one-time fee for indefinite use looks closer to a transfer of a right to use in perpetuity, which pushes toward treating the transaction as more good-like or as a one-off licensing supply rather than a recurring service.
• Term licence — a fee for use over a defined period reads more clearly as a service supplied over that period, with tax consequences that track the term rather than a single point in time.
• Subscription — a recurring fee tied to continued access, typically bundled with updates, support or hosting, reads as a continuous service supply and is the pattern most SaaS arrangements follow.

None of this is a bright line, and vendors structure the same commercial relationship as any of the three depending on their own billing preferences. Classify from the contract terms in front of you, not from what "feels like" a licence.

SaaS, hosting and the OIDAR question

A subscription to hosted software — where the customer logs into a remotely run application and never takes possession of the underlying code — is a supply of services. The characterisation issue for SaaS is usually not goods-versus-services, which is settled, but which service code applies: it can sit within the IT design and development group if the access is bundled with substantial custom configuration or support, or under the hosting and cloud infrastructure codes where the offering is closer to infrastructure provisioning than to a developed application.

The additional wrinkle is cross-border. Where the SaaS supplier is located outside India and is supplying to a non-business, non-registered recipient in India, the transaction can fall within the OIDAR framework — online information and database access or retrieval services — which shifts registration and payment obligations onto the foreign supplier rather than the domestic recipient in the way the ordinary reverse charge would. Conversely, an Indian SaaS business billing a business customer through the normal forward charge is not affected by OIDAR at all; it is a domestic B2B service like any other 9983 supply. Confirm your position against the current OIDAR provisions if you sell hosted software to consumers outside your own registration state or country, rather than assuming the ordinary domestic rules apply unchanged.

Related codes for adjacent IT work

Two of these are worth flagging on their own. Hosting and cloud infrastructure services move between 9983 and 9984 depending on whether the substance is IT service delivery or telecommunications-style infrastructure provisioning, so a cloud hosting invoice is not automatically wrong just because it uses either heading — check what the contract is actually delivering. And digital marketing platforms and related tooling are coded separately again; see our guide to digital marketing service codes if your software business also sells marketing-adjacent tooling.

Exporting software services

Most readers coding software invoices are billing clients outside India, so the export rules matter as much as the SAC does. Section 2(6) of the IGST Act sets five conditions for a supply of services to qualify as an export: the supplier is located in India; the recipient is located outside India; the place of supply is outside India; payment is received in convertible foreign exchange, or in Indian rupees where permitted by the Reserve Bank of India; and the supplier and recipient are not merely establishments of the same distinct person. Meet all five and the supply is zero-rated; miss one and it is a domestic supply, whatever currency the invoice is raised in.

Two of those five conditions cause most of the trouble in IT services specifically.

The intermediary problem. Section 13(8) of the IGST Act fixes the place of supply for an intermediary at the intermediary's own location, regardless of where the client sits. An Indian company that merely arranges, facilitates or brokers a supply between a foreign principal and an end customer — rather than supplying the underlying service on its own account — is an intermediary, and its place of supply is India. The supply is then domestic GST, not a zero-rated export, no matter how the invoice is worded or which currency is used to pay it. Our place of supply rules guide covers this framework in more detail.

The same-entity problem. An Indian branch, liaison office or subsidiary that bills its own foreign parent or head office can fail the "not merely establishments of the same distinct person" condition, because the two are treated as establishments of one legal person under the establishment rules rather than as independent parties to a cross-border sale. Whether this bites depends on the exact corporate and establishment structure, and it is worth checking specifically rather than assuming intercompany billing to a parent is automatically an export.

Where the five conditions are genuinely met, you can export under a letter of undertaking without paying IGST upfront, or pay IGST and claim a refund afterwards — our LUT filing guide covers how to choose between the two routes and what the LUT filing itself involves. The export invoice should carry the correct SAC for the service actually supplied, the endorsement required for a zero-rated supply — typically "supply meant for export on payment of integrated tax" or "supply meant for export under bond or letter of undertaking without payment of integrated tax" as applicable — and the recipient's details in the country of supply. For the freelancer and small-team version of this problem, see our guide to GST for freelancers and service exporters, which walks through the same conditions without the corporate-structure complications.

Invoicing a software engagement

The SAC on the invoice matters less than the description sitting next to it. "IT services" or "software work" supports no code in particular and gives a reviewing officer, or your own accountant six months later, nothing to check the code against. "Custom application development — Phase 2, per statement of work dated [date]" supports 998313 or its neighbours without further explanation, and it is the description, not the digits, that actually proves what was supplied. Our invoice format and rules guide covers the mandatory fields beyond the SAC itself.

Software engagements are also billed in shapes that trip up standard invoice templates. Milestone billing, where an invoice is raised on completion of a defined deliverable, ties the time of supply to that milestone rather than to a calendar period. Time-and-materials billing, where an invoice is raised periodically against hours logged, behaves more like a continuous supply of services and should be invoiced on the periodic cycle the contract specifies rather than left to accumulate. Either way, an advance received against a services contract — a mobilisation payment before work starts, or a deposit against a fixed-price engagement — is generally taxed on receipt for services, unlike the treatment for goods. Our guide to GST on advance payments covers how that receipt is reported and reconciled against the invoice raised later.

Common classification errors

• Using a goods HSN on a services invoice. Coding a custom development engagement under HSN 8523, because "software" sounds like the media chapter, mischaracterises the supply as a good when the substance is development effort. Reserve 8523-style goods coding for the packaged, off-the-shelf case discussed above, and even then confirm it against your specific facts.
• Using 9983 for what is really staffing. Supplying developers to sit inside a client's team and work under the client's direction is manpower supply, not IT consulting, and it carries its own code and its own reverse charge considerations. See our guide to SAC codes for manpower supply for how to tell the two apart — the test is usually who directs the work, not what skill is being supplied.
• Inconsistency between the invoice SAC and GSTR-1. A code typed correctly on the invoice but transposed, truncated, or defaulted to a generic value in the billing system's GSTR-1 export creates a mismatch that surfaces only at reconciliation time, by which point dozens of invoices may carry the same error. Spot-check a sample of filed returns against the invoices they summarise rather than trusting the export to have preserved the code correctly.

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