Reverse Charge Mechanism (RCM) under GST on Security Services (Applicability from 01.01.2019) –
RCM On Security Service has been introduced in GST by Government vide Notification No. 29/2018 – Central tax dated 31.12.2018.
Before Understanding RCM on Security Service let’s first understand difference between Normal Charge & Reverse Charge.
Normal Charge : In Normal Charge Supplier (Seller or Service Provider) Charge GST on Invoice & collect it from customer & pay it to Government.
Reverse Charge : Reverse Charge is mechanism where the Recipient of the goods and/or services is liable to pay GST instead of supplier.
GST Applicability on Security Service on or before 31.12.2018 :
On or before 31.12.2018 Security service provider charge GST on invoice & collect GST from customer & pay it to Government so that means Security Service Provider was liable to pay GST .
GST Applicability on Security Service from 01.01.2019 :
With effect from 01.01.2019 Any Registered Person receiving security services (Service provided by way of supply of security personnel) from any person other than a body corporate is required to pay GST on reverse charge basis.
For Example : ABC being partnership firm provide security service to XYZ (Service Receiver) then GST liability is on XYZ on Reverse charge basis.
But in the same example if ABC is a body corporate then the case is normal charge & ABC will charge GST on invoice & collect GST amount from XYZ & pay it to Government.
However, Government Department/Establishment/Agency who have taken registration under GST only for TDS purpose and those paying tax under Composition Scheme are not required to pay GST on RCM basis.