Quick Answer

An annual licence for software that extracts data from Tally and exports it to Excel should ordinarily be billed as a service under:

• SAC code: 997331
• Description: Licensing services for the right to use computer software and databases
• GST rate: 18%
• Intrastate sale: CGST 9% + SGST 9%
• Interstate sale: IGST 18%

Because the customer receives permission to use the software for one year rather than ownership of the software or its source code, SAC 997331 is generally more appropriate than a goods HSN code.

Is Annual Software Subscription Billed Under SAC or HSN?

Software transactions can sometimes create confusion because software may be delivered through a download, installation package, cloud platform or physical storage device.

The classification depends mainly on the nature of the transaction.

In an annual subscription arrangement:

• The customer receives the right to use the application for a specified period.
• The licence expires unless renewed.
• Ownership of the software remains with the developer.
• The customer does not receive the source code or intellectual-property rights.
• Updates and support may be included during the subscription period.

This type of supply is generally treated as a software licensing service. Therefore, a Services Accounting Code, or SAC, should normally be used.

The CBIC Scheme of Classification of Services describes SAC 997331 as “Licensing services for the right to use computer software and databases.” CBIC Scheme of Classification of Services

Recommended SAC Code for Annual Software Licence

CBIC’s rate notification places permitting the use or enjoyment of intellectual-property rights relating to information-technology software under Heading 9973 at a central tax rate of 9%. Together with the corresponding state tax, this normally results in total GST of 18%. CBIC Notification No. 11/2017—Central Tax (Rate)

Suggested Name for the Billing Item

You can create the following service item in your accounting software:

Service name:

Tally Data Export Software – Annual Licence Subscription

Alternatively:

Annual Software Licence Subscription – Tally Data Extraction and Excel Export Application

SAC code: 997331
GST rate: 18%
Unit: Licence or Year

Avoid describing the transaction simply as “software sale” when you are only granting a renewable, time-limited licence.

Recommended Invoice Description

Use an invoice description that clearly identifies the software, licence period and nature of the supply.

For example:

Annual licence subscription for the right to use Tally data extraction and Excel export software, valid from 01-10-2026 to 30-09-2027. Includes software activation, standard updates and remote support according to the subscription terms.

If the licence is restricted to a particular computer, company, serial number or user count, you may also mention that information:

Annual single-system licence subscription for Tally data extraction and Excel export software, valid from 01-10-2026 to 30-09-2027.

Do not include confidential activation keys or passwords on the GST invoice.

GST Invoice Example for a Customer in the Same State

Suppose your business and customer are both registered in Delhi and the annual subscription price is ₹10,000 before GST.

For an intrastate supply, charge:

• CGST: 9%
• SGST: 9%
• Total GST: 18%

GST Invoice Example for a Customer in Another State

Suppose your business is registered in Delhi and the customer is registered in Haryana.

For an interstate supply, charge IGST at 18%, subject to the applicable place-of-supply rules.

Always collect and verify the customer’s:

• Legal business name
• Billing address
• State
• GSTIN, if registered
• Place of supply

An incorrect state or GSTIN can lead to the wrong application of CGST, SGST or IGST.

How to Create the Service Ledger or Item in TallyPrime

The exact screen names may differ slightly between TallyPrime versions and configurations, but the service can ordinarily be created using an accounting ledger.

Create a Software Subscription Sales Ledger

1. Open the required company in TallyPrime.
2. Go to Create → Ledger.

3. Enter the ledger name:

   Software Licence Subscription

4. Place it under Sales Accounts.
5. Enable GST applicability.
6. Select the nature of transaction applicable to your sales.
7. Enter SAC 997331.
8. Set the GST rate to 18%.
9. Save the ledger.

You can then use this ledger while recording the sales invoice.

If you prefer item-based invoicing, create a service item only if your Tally configuration supports the required service-invoice workflow. For many businesses, a properly configured sales ledger is simpler for software subscriptions.

Suggested Tally Ledger Configuration

Have your accountant verify the taxability and nature-of-transaction settings before issuing the first live invoice.

When Other SAC Codes May Apply

SAC 997331 is suitable when you are licensing your standard software to customers. Separate work may require a different classification.

The CBIC classification schedule separately identifies IT consulting, development, hosting and other information-technology services under the 99831 group. CBIC Scheme of Classification of Services

Standard Software Licence Versus Custom Development

The distinction between licensing and development is important.

Use SAC 997331 when:

• You developed the application as your own product.
• You sell the same application to multiple customers.
• Customers receive activation for a specified period.
• You retain ownership of the software.
• The subscription must be renewed annually.
• Ordinary updates and support are bundled with the licence.

Consider SAC 998314 when:

• A customer hires you to develop a unique application.
• The software is designed specifically for that customer.
• Development charges are billed separately.
• The agreement involves delivery of customised software or source code.
• The customer owns some or all of the resulting intellectual property.

If your invoice includes both an annual licence and substantial customisation, it is usually clearer to show them as separate invoice lines.

Can Installation and Support Be Included in the Subscription?

Yes. Basic installation, activation, updates and standard remote support may be bundled with the annual software subscription when they are incidental to the principal supply of the licence.

A single line can be used, such as:

Annual Software Licence Subscription, including standard installation assistance, updates and remote support

However, separate invoice lines may be preferable when:

• Installation is charged independently.
• On-site visits are chargeable.
• Extensive training is provided.
• Custom reports or features are developed.
• Data migration is separately priced.
• Premium support is sold as a separate plan.

Separating material services makes the invoice easier to understand and helps support the selected SAC classification.

Should You Use HSN 8523 for the Software?

Normally, not for the annual subscription described here.

HSN 8523 is associated with certain recorded media and packaged software transactions involving physical media. It should not automatically be used merely because an application is downloaded or installed on a computer.

Your customer is paying for a one-year right to use the application. The appropriate classification is therefore generally a service under SAC 997331, rather than a physical-goods HSN classification.

Recommended Subscription Terms

Your quotation, invoice or licence agreement should clearly state:

• Subscription start date
• Subscription expiry date
• Number of permitted users or computers
• Whether the licence is transferable
• Renewal price or renewal conditions
• Features included in the selected plan
• Support coverage
• Update policy
• Data backup responsibilities
• Refund or cancellation terms
• Restrictions on copying, resale and reverse engineering
• Whether Tally must be licensed and installed separately

This helps demonstrate that the transaction is a licence to use the software rather than a transfer of ownership.

Important Tally Disclaimer

If your application connects to or extracts information from Tally, include a suitable disclaimer in your invoice, website or licence agreement:

Tally is a trademark of its respective owner. This software is independently developed and is not owned, endorsed or certified by Tally Solutions unless expressly stated otherwise. A valid and appropriately configured Tally licence may be required.

Avoid using Tally’s logo or branding in a way that could suggest an official partnership unless you have written authorisation.

Common Billing Mistakes

Using an HSN code instead of an SAC code

A renewable annual software licence is normally a service. Entering a goods HSN merely because the customer downloads an installer may misrepresent the actual supply.

Writing only “software charges”

This description is too broad. Mention that it is an annual licence subscription and include its validity period.

Not mentioning the subscription period

The invoice should clearly show when the licence begins and expires.

Charging CGST and SGST to an interstate customer

Check the customer’s state and the applicable place of supply. Interstate supplies generally require IGST.

Combining development and subscription without clarification

If you charge for custom development in addition to the licence, show separate lines with appropriate descriptions and classifications.

Calling the customer the owner of the software

Unless you are transferring the intellectual property, the customer is normally a licensee—not the owner of your software or source code.

Issuing an invoice without licence terms

An invoice alone may not sufficiently explain restrictions, renewals, support commitments and data responsibilities. Maintain separate subscription terms or an end-user licence agreement.

Best Practices for Selling Subscription Software

• Use a written annual software licence agreement.
• Issue a proper GST tax invoice.
• Mention SAC 997331 and the licence period.
• Keep subscription and payment records.
• Record the customer’s activation details securely.
• Send renewal reminders before expiry.
• Maintain a privacy policy if customer or accounting data is processed.
• Use secure communication between Tally and the application.
• Avoid storing customer accounting data unless necessary.
• Explain whether exported Excel files remain on the customer’s computer.
• Provide backups of licence records.
• Keep custom development charges separate.
• Never promise official Tally compatibility or certification without authorisation.
• Obtain professional advice for unusual contracts or international customers.

Frequently Asked Questions

What is the SAC code for an annual software subscription?

The generally appropriate code is SAC 997331, covering licensing services for the right to use computer software and databases.

What is the GST rate on an annual software licence?

The normal GST rate is 18%—either CGST 9% plus SGST 9% for an intrastate supply or IGST 18% for an interstate supply.

Should I use SAC or HSN for my software?

Use SAC when providing a time-limited software licence or subscription as a service. An HSN code may be relevant in certain transactions involving software supplied as goods or on physical media, but it is normally unsuitable for the annual subscription described here.

Can I write “annual maintenance” on the invoice?

Use “annual maintenance” only when you are genuinely billing maintenance or support. For the right to use the application, “Annual Software Licence Subscription” is more accurate.

Can installation and support be included under SAC 997331?

Basic installation assistance, activation, updates and standard support can generally be included when they form part of the annual licence package. Material or separately priced services should be separately described and classified.

Which SAC applies to customised software development?

Custom software design and development may fall under SAC 998314, depending on the agreement and actual work performed.

What should be the invoice quantity and unit?

You can use:

• Quantity: 1
• Unit: Licence, Subscription or Year

The invoice should also mention the licence validity dates.

Can I bill renewal under the same SAC?

Yes. A renewal of the annual right to use the software can ordinarily continue under SAC 997331.

Does the customer own the software after paying the subscription?

No, unless your agreement expressly transfers ownership or intellectual-property rights. An annual subscriber generally receives only a limited right to use the application.

Should GST be calculated on a GST-inclusive price?

If your advertised price includes GST, calculate the taxable value by dividing the inclusive amount by 1.18.

For example, if the total price is ₹11,800:

• Taxable value: ₹10,000
• GST: ₹1,800
• Total: ₹11,800

Do I need to mention Tally in the invoice description?

You may describe the functional integration, but avoid language implying that the product is officially made, approved or endorsed by Tally Solutions unless that is true.

Conclusion

For an independently developed application that extracts data from Tally, exports it to Excel and is licensed to customers annually, the most suitable classification will ordinarily be:

• Type of supply: Service
• SAC code: 997331
• GST rate: 18%
• Invoice description: Annual Software Licence Subscription
• Same-state customer: CGST 9% + SGST 9%
• Different-state customer: IGST 18%

This classification is appropriate when you retain ownership of the application and provide only a renewable right to use it. If the contract includes substantial custom development, hosting or separately charged professional services, obtain confirmation from your CA or GST practitioner before finalising the invoice structure.

 

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