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.

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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: 🔗

Parameter	Goods (HSN)	Services (SAC)
Code Type	HSN	SAC
UQC Required	Yes	No
Quantity Required	Yes	Not Mandatory
GST Portal Validation	Strict with UQC	Accepts only NA

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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)

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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

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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.

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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

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✅ 2. Avoid Using Quantity for Services 🔗

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

? Do NOT use:

• 12 Nos
• 12 Months as UQC

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✅ 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

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✅ 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

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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

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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

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Best Practice for Subscription Billing 🔗

Instead of:

Qty: 12 Months

Use:

Description: Google Workspace – 12 Months Subscription
Qty: 1

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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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