In this paper we propose a novel algorithm for cutting deformable (soft) assets, modeled using the meshfree method of Smoothed Particle Hydrodynamics (SPH). The key idea of the algorithm is to label all particles during the virtual cut operation to obtain particle codes. Since the traditional SPH formulations ignore particle separation due to cuts, we had to account for the change in topology due to virtual cuts in the SPH formulation. Virtual cut causes disruption in internal forces between separated particles. To avoid separated particles (i.e., particles belonging to different regions) affecting each other's dynamics, the generated particle codes are used for filtering the neighbours before SPH dynamics are computed. Assignment of particle codes eliminates the need for an external grid like structure for detecting newly generated cut surfaces. We exploit the region information extracted from the particle codes to obtain a color field for surface generation. We show that our algorithm can easily be integrated with existing SPH techniques. Our proposed method generates minimum overhead in scenarios where multiple cutting operations are performed on a deformable asset. Particle coding is applied across all particles in parallel and is hence computationally efficient when implemented on a GPU.