Resolving HSN vs SAC and UQC Errors in GSTR-1 for Subscription-Based Services in Tally Prime

Businesses dealing in computer hardware, software, and subscription-based services such as Google Workspace, Tally licenses, AMC (Annual Maintenance Contracts), and cloud services often face a critical challenge while filing GST returns—especially GSTR-1. The issue typically arises when service-based invoices (using SAC codes) include Units of Measurement like “Nos” or “Months,” leading to rejection on the GST portal.

This article explains the root cause of this issue, GST compliance rules, and the correct method to configure and use Tally Prime for error-free GST filing.

Understanding HSN vs SAC

Under GST:

• HSN (Harmonized System of Nomenclature) is used for Goods
• SAC (Service Accounting Code) is used for Services

Key Difference:

What is UQC (Unit Quantity Code)?

UQC represents the unit of measurement used in invoices, such as:

• Nos (Numbers)
• MTR (Meters)
• PCS (Pieces)
• Months (custom usage in services)

? However, GST law mandates:

• UQC is applicable only for goods
• Services must use UQC = NA (Not Applicable)

Why GSTR-1 Gets Rejected

When you:

• Use SAC codes (correct for services)
• But also include UQC like Nos or Months

❌ The GST portal rejects the return because:

• It expects UQC = NA for services
• Quantity fields should be blank or zero

✔ Entries without UQC (NA) are accepted
❌ Entries with Nos/Months are rejected

Common Scenario in IT & Subscription Business

Businesses selling:

• Google Workspace licenses (monthly/yearly)
• Tally software subscriptions
• Cloud hosting services
• AMC contracts

Often invoice like:

Google Workspace – 12 Months – ₹18,000

While logically correct for internal tracking, GST treats this as a service, not goods.

Correct GST-Compliant Approach in Tally Prime

✅ 1. Use SAC Code with UQC = NA

• Create ledger under Sales (Services)
• Assign correct SAC code
• Set UQC as Not Applicable (NA)

? Example:

Google Workspace Subscription (12 Months)
Amount: ₹18,000

✔ Mention duration in description
✔ Do NOT use quantity-based units

✅ 2. Avoid Using Quantity for Services

• Either:
  • Disable quantity in invoice
  • OR use quantity = 1

? Do NOT use:

• 12 Nos
• 12 Months as UQC

✅ 3. Maintain Internal Tracking Separately

If you want tracking:

Option A: Use Narration

• Mention:

  10 Users | 12 Months

Option B: Use Cost Centers

• Track:
  • Customer-wise subscriptions
  • Period
  • Quantity

Option C: Maintain Excel / CRM

• For detailed subscription tracking

✅ 4. Advanced Method: Dual Ledger Strategy

Create:

A. Internal Ledger (Optional)

• With Units (Nos/Months)
• Not used for GST filing

B. GST Ledger (Mandatory)

• SAC code
• UQC = NA

? Use GST ledger in invoices

Configuration Checklist in Tally Prime

Go to:

Gateway of Tally → F11 → Statutory & Taxation → GST

Ensure:

• ✔ Enable GST = Yes
• ✔ Set/alter GST details = Yes
• ✔ Correct SAC codes assigned
• ✔ No UQC assigned to service ledgers

Important Note on Purchase Invoices

Vendors may issue invoices with:

• SAC + Nos/Months

✔ You can record them
❌ But for GSTR-1 (sales), follow GST rules strictly

Best Practice for Subscription Billing

Instead of:

Qty: 12 Months

Use:

Description: Google Workspace – 12 Months Subscription
Qty: 1

Conclusion

The GST portal enforces strict validation rules distinguishing goods and services. While subscription-based services may logically involve duration and quantity, GST compliance requires treating them purely as services using SAC codes without UQC.

To avoid GSTR-1 rejection:

• Always use SAC with UQC = NA
• Avoid quantity-based units in services
• Maintain internal tracking separately

Adapting your Tally Prime setup to align with GST rules ensures smooth return filing, avoids errors, and maintains accurate business records.

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