Recently, Under CGST Act, 2017, some major changes took place by which many industries were affected. Some of them were happy with the changes and some of them is having the struggle to comply with the provisions. Since, the law is new, hence the changes in the act are natural. The government brings the amendment in the act by notifications.
One of the big change has been made is in the security services which has already been applied.
This change has been made by adding entry number 16 in the notification number 09/2017 issued on 28.06.2017. As per this change, many entities providing security services shall get affected.
Although the meaning of term Security Service has not been defined under the GST Act, however, in general, Security Service means those service which has been rendered by any person towards the security of any property (whether movable or immovable) or the security of any person in any other manner. The change in the security services made in the Reverse charge Mechanism which has been applicable from 01.01.2019. In this article, we will present a detailed analysis of GST payment under the Security Service.
Where any person or entity is providing the security services to any person then such services shall be chargeable under Forwarding charge Mechanism and such entity shall levy GST on its tax invoice and paid it to the government at or before the date of filing of GSTR-3B
However, the above system has been changed in the Payment of GST on Security Service on or after 1st January 2019
As per the notification no. 29/2018 – Central Tax (Rate) dated 31st December 2018, GST provisions as applicable to GST payment on Security Service has undergone various changes.
Under the above-referred notification, Now Reverse Charge Mechanism has also been effective on the Security Service. Reverse Charge Mechanism shall be applicable to the Security Service only and only if all the below mentioned conditions get satisfied. In other words, GST is payable by the service servicer, in case if all of the below conditions are satisfied–
The recipient shall be liable for the payment of GST where the security services (services provided by way of supply of security personnel) provided to a registered person
However, nothing shall be applicable to the following:
- A Department/establishment of the Central/State Government or the Union territory;
- A local authority or
- A Government agency who has taken GST registration only for the purpose of TDS payment under Section 51.
- A registered person paying tax under composition scheme
Now let’s try to understand it in simple words:
Here, the notification has been made in respect of security services where
The Service Provider means any person other than the body corporate. Here a question arises that why the body corporate has been excluded from this.
As you know that the government has applied the RCM on those supplies in which the government does not have control over the supplier or they are working in the unorganized market. The same situation shall be applicable here. It is difficult for the entities to control other than body corporate because body corporates have to comply with any provisions under this act and other laws.
The term Body corporate shall be understood as per Section 2(11) of the Companies Act, 2013. As per the said definition, following are covered under the term ‘body corporate’–
- A Company.
- Limited Liability Partnership.
- Any company/corporation incorporated outside India.
- Service Receiver–A registered person located in the taxable territory.
Similarly, the said provision shall not be applicable to the government entity. If you look at the point mentioned about the government entity, you will find that the same name mentioned in section 51 (Tax deducted at source), where the government entities have to deduct the TDS on some specified payments subject to the provision of section 51 of CGST Act, 2017.
Note: A person (Government Entities) shall have to compulsory required to take the registration under section 24, who are deducting TDS under section 51 of the CGST Act, 2017. Also, the said registration is separate from the normal registration.
So, hereby excluding the government entities, the government wants to ensure that If the government entity does not have the normal registration and took the registration only for the purpose of deduction of TDS, then they should not take the registration only for this purpose.
So, If all of the above conditions are satisfied, then, the GST shall be payable by the recipient of the security services. However, as per the above discussion, the said notification shall not be applicable to the person specified in the notification. Let’s take some example for better understanding:
The following table would help to understand the effect of the Reverse Charge Mechanism under different situation:
|Service provider||Service receiver||Person liable to pay GST||Reason|
|Company||Registered person||Service provider||Company is a body corporate and RCM shall not apply and the company shall be liable for the payment of GST|
|Individual||Registered person||Service receiver||All the required conditions are satisfied, and hence GST would be payable under the Reverse Charge Mechanism with the assumption that the service receiver does not include the name of the government entities as specified above.|
|Partnership Firm||Registered person||Service receiver||Since, All of the required conditions are satisfied, and hence GST is payable by the service receiver under the Reverse Charge Mechanism|
|Limited Liability Partnership Firm||Registered person||Service provider||As per companies act, 2013, Limited Liability Partnership is a body corporate and LLP shall be liable for payment of GST and RCM shall not be applicable.|
|Hindu Undivided Family||Registered person||Service receiver||Since, All of the required conditions are satisfied, and hence GST is payable by the service receiver under the Reverse Charge Mechanism|
|Any assessee||Unregistered person||Service provider||For the satisfaction of this entry, it is compulsory that the service provider must be a registered person. Hence, RCM shall not be applicable and the said services shall not become taxable.|