Whether GST will be applicable under reverse charge mechanism (RCM) on security services provided in the month of December 2018 for which payments have been made on or after 01.01.2018 ie.e after 31.12.2018?
With the introduction of Notification No. 29/2018-CT(R) dated 31.12.2018, the Central Government has inter-alia notified the following service which shall be liable to GST under reverse charge mechanism when provided by any person to a registered person located in taxable territory:
“Security services (services provided by way of supply of security personnel) provided to a registered person”.
Insertion of such an entry has created doubt as to whether reverse charge will be applicable on those security services which have been received upto 31.12.2018 but for which payment will be made in January 2019.
In this regard, please find our opinion as under tabulating various situations:
|S.No.||Date of provision of service||Date of issue of invoice||Date of payment||Time of supply||Applicability of RCM/ FCM*|
In all the above cases, time of supply has been determined by applying Section 13(2) of The CGST Act, 2017 and not Section 14 which is applicable where there is a change in the rate of tax in respect of goods or services. In the present case, there is no change in rate of tax but merely the shift of liability of payment of tax from supplier to recipient.
Further, CBEC had clarified vide its guidance note dated 20.06.2012 that merely delay in payment will not add additional liability where point of taxation has already arrived before 01.07.2012. Relevant extract of the guidance note is reproduced herebelow:
“10.1.7 Is the reverse charge applicable on services provided and complete before 1.7.2012 though payments were made after 1.7.2012?
For any service whose point of taxation has been determined and whole liability affixed before 1.7.2012 the new provisions will not apply. Merely because payments are being made after 1.7.2012 will not add any additional liability on the service receiver in respect of such services.”
Though the above note relates to service tax regime when reverse charge was introduced for certain services, however, the same principle shall apply in the GST regime as well.
Further, no TDS will be required to be deducted by specified person where the said services are liable to GST under reverse charge i.e. tax is payable by the deductee.
* FCM- Forward charge mechanism