Overview of Security Service under GST as on 1st April, 2019

Meaning

The term Security Service is not defined in the CGST Act, 2017. As per general understanding Security service is a service wherein a person supplies security personnel to another person for a consideration. However, in the old regime of Service Tax, the term Security Agency was defined under section Section 65(94) of Finance Act, 1994; which is reproduced as under:

“Security agency” means any person engaged in the business of rendering services relating to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity, whether of a personal nature or otherwise, including the services of providing security personnel.

Applicability of GST

GST is applicable on Security services with effect from 1^st July, 2017 under Forward Charge Mechanism (FCM) wherein the provider of security services is liable to pay GST. However, with effect from 1^st January, 2019, the Govt. has introduced Reverse Charge Mechanism (RCM) on certain types of persons, wherein the person receiving the security service will be liable to pay GST.

The relevant extract of the notification of RCM (Notification No. 29/2018- Central Tax (Rate), dated 31^st December, 2018) is reproduced as below:

Analysis

As per section 2(d) of Limited Liability Partnership Act, 2008, the term Body Corporate includes a Limited Liability Partnership (LLP). The entire applicability provision can be analysed from following table:

Conclusion

It is recommended for the supplier to verify/obtain suitable declaration from the recipients to ensure that they are covered under RCM before opting not to pay the tax on Forward Charge. The views and opinions expressed in this article are those of the author and are strictly personal and the author does not take any responsibility.