Software services attract 18% GST when the customer is in India, and 0% when the service is exported under a Letter of Undertaking (LUT).
They are classified under Service Accounting Code (SAC) heading 9983, the group for information technology services, because GST treats a licence to use, develop, host or support software as a supply of service rather than goods.
If you sell to overseas clients, that 0% is not automatic; it applies only when the supply qualifies as an export of services under GST, which includes actually receiving payment in foreign currency.
For any Indian SaaS firm, IT company or global capability centre, getting the cross-border payments for service exporters flow right is what makes the zero-rating stick.
What is the SAC code for software services?
The SAC code for software services is what most people are actually searching for, and getting it right protects your invoices and your refund claims.
All the IT service codes fall under heading 9983 and all carry 18% GST when supplied within India. The table below is the quick reference to keep on hand.
| SAC code | Covers | GST rate |
|---|---|---|
| 998313 | IT consulting and support services, AMC, technical support | 18% |
| 998314 | IT design and development, custom software, web and app development, SaaS platform build | 18% |
| 998315 | Hosting and IT infrastructure provisioning, cloud services | 18% |
| 998316 | IT infrastructure and network management services | 18% |
| 998319 | Other information technology services not elsewhere classified | 18% |
For most SaaS and product companies, 998314 (design and development) and 998315 (hosting and cloud) are the two workhorse codes. Consulting and AMC-heavy IT firms lean on 998313. Mapping the right code once saves repeated mismatch queries later.
Which SAC code for software development services applies?
The SAC code for software development services is 998314. It covers the full build side of the trade: custom application development, web and mobile app work, bespoke platform engineering, and the design that goes with it.
If your business writes code to a client's specification, this is almost always your primary code.
Where teams slip is on the boundary between building and running. Development of a platform sits under 998314, but hosting that platform on the cloud for the client afterward sits under 998315.
A single project can therefore touch two codes on two invoice lines. Splitting them correctly keeps each line clean when you later reconcile a refund.
What is the software GST rate in India?
There is essentially one software GST rate to remember for services: 18%. Every category of software service under SAC 9983 sits at 18% GST when supplied within India.
There is no lower slab for custom development, no separate rate for SaaS, and no concession for maintenance contracts.
The number that changes is not the rate but the place of supply. When the recipient is outside India and the other export conditions are met, the supply becomes zero-rated at 0%.
When the recipient is in India, 18% applies in full and is split as 9% CGST + 9% SGST for an intra-state supply, or 18% IGST for an inter-state one.
How is GST on IT services different across service types?
GST on IT services is uniform in rate but varied in classification, and that difference matters for reporting. Consulting, development, hosting and network management all attract 18%, yet each maps to a different SAC line.
The rate does not reward you for picking one over another, but the correct code reduces friction when the department reconciles your returns.
The table below shows how common IT engagements map to codes, so you can classify at the point of invoicing rather than at audit.
| Engagement | Typical SAC | Notes |
|---|---|---|
| Building a custom web app | 998314 | Development and design |
| Running the client's SaaS on the cloud | 998315 | Hosting and infrastructure |
| Annual maintenance contract | 998313 | Support and AMC |
| Managing a client's network | 998316 | Infrastructure management |
| A service that fits none cleanly | 998319 | Residual IT category |
SAC vs HSN code for software development: when software is goods
Here is a nuance that trips up new exporters. The HSN code for software development questions usually arise because software can be either a service or a good. SAC codes apply when you supply software as a service.
But when software is supplied as a good, for example off-the-shelf or packaged software delivered on media or as a one-time perpetual product, it can be classified under HSN 8523 and treated as a supply of goods.
The practical test is how the software is delivered and consumed. A subscription, a hosted platform, or bespoke development is a service (SAC 9983). A shrink-wrapped or downloadable packaged product sold outright leans towards goods (HSN 8523).
The rate is 18% either way, but the classification changes your invoice fields and your reporting schedules.
When does GST for software services export become zero-rated? The five conditions
GST for software services export is zero-rated, meaning 0% output tax with full input tax credit and a refund.
But an export of services counts as an export only when all five conditions in Section 2(6) of the IGST Act are satisfied:
- The supplier of service is located in India.
- The recipient of service is located outside India.
- The place of supply is outside India.
- The payment is received in convertible foreign exchange (or in INR where the RBI permits).
- The supplier and recipient are not merely establishments of the same person (not distinct branches of one entity).
Condition 4 is the one that turns a tax question into a payments question. Until the foreign currency actually lands and is documented, the supply has not qualified as an export.
The refund mechanics that follow are governed by the zero rated supply under gst rules.
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Worked example: a custom-software dev shop billing a US client
Meet Karthik, who runs a 10-person software development shop in Hyderabad. He signs a US client for a bespoke logistics platform and bills USD 20,000 for the build.
- Taxable value: roughly ₹17,00,000 at an illustrative USD/INR of ₹85
- SAC on invoice: 998314 (design and development)
- GST charged: 0%, zero-rated under LUT, with the declaration "supply meant for export under LUT without payment of IGST"
- Payment: received in US dollars into his Indian account
Because all five export conditions hold, Karthik charges the US client no GST. He still paid 18% GST to Indian vendors on his cloud subscriptions, laptops and co-working seats through the year, and that input GST is refundable.
His job at invoicing time is simple: Put 998314 on the line, state the LUT declaration, and make sure the dollars actually arrive and are documented.
Worked example: a SaaS company with mixed India and export revenue
Now take Nivaan Software, a SaaS company in Pune whose subscription product sells to both Indian and overseas customers. In a quarter it books ₹40,00,000 of revenue: ₹15,00,000 from Indian customers and ₹25,00,000 from clients in the US and UK.
On the Indian ₹15,00,000, Nivaan charges 18% GST under SAC 998315 (hosting and cloud), collecting ₹2,70,000 of output tax. On the export ₹25,00,000, it charges 0% under LUT.
Its input GST for the quarter, on cloud infrastructure, tools and marketing, is ₹3,20,000.
Nivaan uses the domestic output tax first, then claims a refund of the unutilised input credit attributable to exports through the how to claim itc in gst route.
The split between taxable and zero-rated revenue is exactly what the refund formula apportions, so clean SAC tagging on every invoice line is what keeps the claim defensible.
The broader treatment of a foreign-currency deal is covered in gst on international transactions.
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Worked example: domestic invoice vs export invoice side by side
Seeing the same subscription billed two ways makes the rate difference concrete. Take a SaaS product billing ₹5,00,000 for an annual plan, once to an Indian customer and once to a US customer under LUT.
Domestic customer (Mumbai to Bengaluru):
- Taxable value: ₹5,00,000
- IGST at 18%: ₹90,000
- Invoice total: ₹5,90,000
- SAC on invoice: 998315 (hosting/cloud)
Export customer (Bengaluru to New York, under LUT):
- Taxable value: ₹5,00,000
- GST: 0% (zero-rated under LUT, no IGST charged)
- Invoice total: ₹5,00,000
- SAC on invoice: 998315, with a "supply meant for export under LUT without payment of IGST" declaration
The export invoice carries no output tax, and the input GST the company paid on cloud, tooling and vendors is claimable as a refund.
The only structural difference on the invoice is the tax line and the LUT declaration; the SAC code and taxable value stay identical. That is why disciplined SAC tagging pays off equally on both sides of the border.
How to pick the right SAC code on an invoice
Choosing the SAC on an invoice is a two-second decision once you know the test, and a costly one when guessed.
Picture Sana, a solo consultant who does both advisory calls and hands-on development for the same client and is unsure which code to put.
Her rule of thumb: Match the code to what the line actually delivers. Advisory and support work goes to 998313. The actual build goes to 998314. If she hosts anything for the client, that line goes to 998315.
When one invoice mixes advice and development, she splits it into separate lines with separate codes rather than forcing one code onto everything.
The reason to be strict is reconciliation. When the department matches your GSTR-1 lines against your returns, consistent SAC codes across quarters raise no flags, while a code that jumps around invites a query.
Independent developers can check how the same logic lands on them in the gst for freelancers guide, since the classification rule is identical even at small scale.
How is the place of supply decided?
The rate hinges on where the recipient is, so the place-of-supply test is the pivot of every software invoice. For most B2B software services, the place of supply is the location of the recipient.
If your client is a registered business abroad, the place of supply is outside India, which opens the door to zero-rating (subject to the five conditions above).
Two situations complicate this. First, if you cannot establish the recipient's location from your records, the place of supply may default to the supplier's location, pulling the supply back into 18% territory.
Second, transactions between an Indian entity and its own foreign branch fail condition 5 and are not treated as exports at all. Keeping proper contracts and address records for each client is what protects the 0% position.
Do software exporters need GST registration?
A common question from small SaaS founders and independent developers is whether they must register at all when they only bill overseas clients.
Export of services is an inter-state supply under GST, and businesses making inter-state taxable supplies generally need to register regardless of turnover, though there are relaxations for certain service providers.
Registration is also what lets you file the LUT and claim refunds in the first place, so most exporters register early by choice.
Once registered, e-invoicing may apply above the notified turnover threshold, and export invoices are pushed through the irp portal gst to generate the invoice reference number.
The classification logic stays the same whether you are a 200-person firm or a single developer.
Reverse charge on imported SaaS and OIDAR
The flow runs the other way too. When an Indian business buys software or SaaS from a foreign vendor with no Indian GST registration, GST does not disappear. The Indian recipient usually pays it under the reverse charge mechanism (RCM).
For automated, remotely delivered digital services, the relevant category is OIDAR, Online Information and Database Access or Retrieval services.
If your business imports a foreign cloud tool or API for business use, you typically self-assess 18% IGST under RCM, pay it, and (where eligible) claim it back as input tax credit.
The classification detail sits in the oidar services rules, distinct from your outbound export treatment.
Worked example: imported-SaaS RCM for an Indian buyer
Consider Meridian Labs, a Bengaluru product team that subscribes to a US design tool for USD 500 a month and an overseas analytics API for USD 300 a month. Neither vendor has an Indian GST registration.
- Monthly import value: roughly ₹68,000 at an illustrative USD/INR of ₹85
- IGST under RCM at 18%: roughly ₹12,240
- Treatment: Meridian self-assesses and pays the ₹12,240, then claims it back as input tax credit where eligible
The cash effect is close to neutral for a fully creditable business, but skipping the self-assessment is a genuine exposure at audit.
This is a frequent blind spot for GCCs and SaaS teams buying overseas developer tooling, precisely because no vendor invoice shows Indian GST. The safe habit is to log every foreign digital subscription and run the RCM entry each month.
Filing and invoicing: getting the trail right
Clean classification only pays off if the paperwork matches. For export of services, the export invoices reported in GSTR-1 for export of services must reconcile with GSTR-3B and with your bank realisation proof when you claim the refund.
Two habits keep refunds moving. First, put the correct SAC on every line and state the LUT declaration on export invoices.
Second, retain realisation evidence for each remittance, because a refund officer will match the foreign inward payment against the invoices in your FIRC for GST refund claim before releasing the amount.
The way gst on foreign exchange applies to the conversion itself is a separate line to confirm with your CA.
How Xflow supports software exporters
Xflow is a cross-border payments platform, not a CA or tax filer, so it does not classify your SAC or lodge your GST return. What it strengthens is condition 4 and the refund trail behind it.
When you collect export payments through Xflow, each remittance comes with automatic eFIRA, the realisation proof that a supply of software services actually qualified as a zero-rated export.
You receive through vBAN accounts at the mid-market rate, so a larger share of each USD, GBP or EUR invoice reaches your Indian account.
That combination, documented realisation plus better conversion, is exactly what a services exporter needs to make the 0% treatment defensible.
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Frequently asked questions
SAC 998314 covers IT design and development, including custom software, web and app development, and building a SaaS platform. It attracts 18% GST for domestic supply.
18% when the customer is in India, split as 9% CGST + 9% SGST intra-state or 18% IGST inter-state. Exports under LUT are zero-rated at 0% with input tax credit refundable.
Export of software services is zero-rated, so 0% output tax, provided all five export conditions are met, including receipt of payment in foreign currency. You can still claim input tax credit and a refund.
Use SAC 9983 when software is supplied as a service (subscriptions, hosting, custom development). Use HSN 8523 when it is packaged, off-the-shelf software supplied as a good. Both are taxed at 18%.
Yes. A SaaS subscription is a service under SAC 9983 (commonly 998314 or 998315) at 18% for Indian customers. Exported SaaS is zero-rated under LUT, and imported SaaS may attract RCM under OIDAR.
Usually yes, under the reverse charge mechanism. If a foreign vendor has no Indian GST registration, the Indian recipient self-assesses 18% IGST on the import, often as OIDAR, and may reclaim it as input tax credit.
