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.
HSN Code and GST Rate Summary
| Product / Service | HSN / SAC Code | GST Rate | Notes / Conditions |
|---|---|---|---|
| Packaged application software supplied on CD / DVD / USB etc. | 8523 80 20 | 18% | Treated as goods. Off the shelf, canned software supplied on physical media. |
| Downloaded or cloud based application / computer software licence | SAC 9983 | 18% | Treated as services such as licensing, development, implementation or maintenance. |
| Annual software maintenance, AMC and support services | SAC 9983 | 18% | Covers technical support, upgrades and related IT services. |
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.
I am a Chartered Accountant with 5 years of experience specializing in GST, income tax, and HSN code classification. I help businesses with GST compliance, tax planning, and financial advisory, ensuring they meet regulatory requirements while optimizing their tax strategies. I aim to simplify GST filings, income tax laws, and HSN code classifications, helping professionals and business owners stay informed and compliant.
Frequently Asked Questions
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What is the HSN code for application software?
For packaged application software supplied on physical media, businesses usually use HSN 8523 80 20 with GST at 18%. Where the same software is supplied as a download or on a subscription basis, it is normally treated as a service under SAC 9983, still taxed at 18%.
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Are software services classified separately from computer software?
Yes. Packaged computer software is treated as goods under HSN 8523, while software services such as SaaS, online access, custom development and AMC are grouped under SAC 9983. Both generally attract 18% GST, but the codes used in invoices and returns are different.
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How does GST apply to software products?
Under GST, most software products and services fall under the 18% slab. Packaged software uses HSN 8523 and software services use SAC 9983. You charge GST at 18% on the transaction value, mention the correct code on the invoice and report the supply in your GSTR 1 and GSTR 3B.
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Are there different HSN codes for cloud based vs traditional software?
Cloud based or SaaS software is normally treated as a service under SAC 9983. Traditional software sold on CD or as a perpetual licence on media is classified under HSN 8523. There is no special HSN just for cloud. The distinction is between goods on media and services delivered online.
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Can software bundled with hardware be classified differently under HSN?
Yes. When software is bundled with hardware, you have to see which component is the principal supply. If the customer is mainly buying hardware with incidental software, the code for the hardware heading applies. If the contract is for a software solution with incidental hardware, the IT service code under 9983 may be more appropriate.