Software HSN Code: Classification for Application and Computer Software
Under GST, software can fall under either goods or services depending on how it is supplied. Application software sold in boxes or on physical media is treated as goods, while downloadable, subscription based or customised software is generally treated as a service. Using the correct HSN or SAC code for each type of supply helps you apply the right GST rate, file returns correctly and avoid disputes during assessment.
In day to day business, software invoices usually fall into three buckets: packaged off the shelf applications, customised or licensed software accessed online, and software support or implementation services. All three fall under the broad 18% slab, but the classification changes between HSN 8523 for goods and the 9983 series for services.
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Software SAC Code Classification and GST Rates
Here are some commonly used HSN codes and GST rates for this category
4 Digit SAC Code Classification
| HSN/SAC Code | HSN/SAC Code Title | GST Rate |
|---|---|---|
| 9971 | Other Financial and related services | 18% |
| 9973 | Other Leasing or rental services, with or without operator | Same rate of integrated tax as applicable on supply of like goods involving transfer of title in goods |
| 9983 | Any services provided by, _(a) the National Skill Development Corporation set up by the Government of India;(b) a Sector Skill Council approved by the National Skill Development Corporation;(c) an assessment agency approved by the Sector Skill Council or the National Skill Development Corporation;(d) a training partner approved by the National Skill Development Corporation or the Sector Skill Council, in relation to-(i) the National Skill Development Programme implemented by the National Skill Development Corporation; or(ii) a vocational skill development course under the National Skill Certification and Monetary Reward Scheme; or(iii) any other Scheme implemented by the National Skill Development Corporation. | 0% |
| 9984 | Services of public libraries by way of lending of books, publications or any other knowledge-enhancing content or material. | 0% |
6 Digit SAC Code Classification
| HSN/SAC Code | HSN/SAC Code Title | GST Rate |
|---|---|---|
| 997112 | Deposit services | 18% |
| 997331 | Licensing services for the right to use computer software and databases. | Same rate of integrated tax as applicable on supply of like goods involving transfer of title in goods |
| 998313 | Information technology (IT) consulting and support services | 18% |
| 998314 | Information technology (IT) design and development services | 18% |
| 998315 | Hosting and information technology (IT) infrastructure provisioning services | 18% |
| 998319 | Other information technology services n.e.c | 18% |
| 998434 | Software downloads | 18% |
* GST rates may vary based on the latest GST notifications and amendments
What is the HSN code for application software?
Application software supplied in a tangible form such as CD, DVD, USB drive or any other physical media is normally classified as goods under HSN 8523 80 20. This heading covers software recorded on physical media. GST at 18% is commonly applied on the transaction value. If the same software is supplied purely online as a download or on a subscription basis, tax officers generally treat it as a service under the 9983 series instead of 8523.
What Is the HSN Code for Software?
For most standard off the shelf products, the software is classified under HSN 8523 at 18%. Where the contract is for development, customisation, implementation or access to a hosted application, the supply generally falls under SAC 9983, which covers information technology and software related services. You should read the contract carefully. If the dominant element is the licence or use of software as a service, it is safer to use the service code rather than the goods code.
Businesses that sell both boxed and downloadable versions may need to maintain separate item masters with the correct codes. This makes it easier to prepare GST invoices, E way bills and returns without manual corrections later.
How Application Software Is Classified under HSN
Application software covers all kinds of programs such as accounting software, ERP, CRM, billing tools, design programs and utilities. If a customer receives a physical copy which can be stored and resold, the supply is treated as goods under HSN 8523. If the customer only receives a right to use via login or online access, the supply is treated as a service under SAC 9983. The GST rate of 18% is the same in both cases, but the code on the invoice and in your returns will be different.
In long term enterprise contracts, implementation, training and support may be bundled with the licence. These can be treated as a composite supply where the principal supply is the software service. Many businesses therefore classify the whole contract under SAC 9983 with 18% GST for simplicity.
The HSN Code for Computer Software and Software Services
Computer software that is delivered on media and can be traded like any other good falls under HSN 8523. Software services such as SaaS subscriptions, web based tools, mobile app access, custom development and maintenance are covered under SAC 9983. Cloud based software does not need a separate HSN code. It is simply grouped in the same information technology services heading as other software services and taxed at 18%.
If you provide both software and consulting, you can map your billing heads clearly. Use 8523 for any packaged licence sale and 9983 for configuration, AMC and training, so that your GST records remain clean during audits.
GST on Software Products and Services
GST on almost all software related supplies is 18%. This applies whether you are selling a licence, charging a subscription, or providing implementation and maintenance support. The main difference is how you classify the supply. For goods, you use HSN 8523. For services, you use SAC 9983. When software is bundled with hardware, such as a server with pre loaded programs, you have to see which part is the main supply. If the hardware is the dominant element, the code for the hardware may apply to the full bundle.
Correct classification ensures that your E invoicing, E way bill generation and GST return reporting are consistent. It also helps customers take input tax credit smoothly because your invoices carry the right HSN or SAC details.
