GST on Security Services- GST Applicability under RCM or Forward Charge

GST on security services was applicable from the very inception of the GST laws i.e. 1^st July 2017 under forward charge mechanism. But later amendments were made in the law and it has been brought under “Reverse Charge Mechanism (RCM) from 1^st January 2019 vide Notification No. 29/2018- Central Tax (Rate) dated 31-12-2018. Let’s have a discussion…

RCM on Security Services under GST

GST has been implemented in India w.e.f. 1^st July 2017. From the very first date, security services are covered under GST at the prescribed rate of 18% under forward charge mechanism. It means that the supplier of security services is required to collect GST from the recipient of services and pay it to the Government.

However, the Government made certain amendments in GST taxability of security services from 1^st January 2019 vide Notification No. 29/2018- Central Tax (Rate) dated 31-12-2018 and notified security services under reverse charge mechanism (RCM) in certain cases.

When RCM is applicable in security services?

Reverse charge mechanism shall be applicable in case of security services where the supplier of security services is a non-corporate entity like individual/ HUF/ partnership firm/AOP.

According to the above notification, if any person other than a body corporate provides security services to a registered person then such registered person receiving the services shall be required to pay GST to the Government under reverse charge mechanism (RCM).

When RCM is not applicable on security services?

In the following cases, RCM on security services is not applicable. It means that GST shall be paid by the supplier of security services (under forward charge) in the following cases:

• Where the recipient of security services is a Government Department or Establishment which has taken registration only for TDS and not for making taxable supply of goods or services
• Where the recipient of security services is a registered person paying tax under section 10 i.e. Composition taxpayer
• Where the provider of security services is a body corporate
• Where the recipient of security services is not registered under GST

Note: Security Services here means services provided by way of supply of security personnel only. In case of security services in the form of CCTV camera installations etc., it does not fall under RCM.

Is RCM applicable on security services provided to educational institutions?

Services provided to an educational institution by way of security performed in such educational institution, is exempt from GST. Since, such security services provided to educational institution are exempted, there is no issue of paying tax under RCM on such services.

Meaning of Educational Institution

“Educational institution” means an institution providing services by way of:

• Pre-school education and education up to higher secondary school or equivalent;
• Education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;
• Education as a part of an approved vocational education course

Is LLP treated as a body corporate for RCM on security service?

According to Explanation (e) of Notification No. 13/2017- Central Tax (Rate) dated 28-06-2017, A “Limited Liability Partnership” formed and registered under the provisions of the Limited Liability Partnership Act, 2008 shall also be considered as a partnership firm or a firm. Thus, an LLP shall not be treated as a body corporate for the purposes of deciding applicability of RCM on security services.

However, in an advance ruling in the matter of AS&D Enterprise LLP [Advance Ruling No. HR/HAAR/05/2022-23], the Advance Ruling Authority had a different view and held that an LLP is to be considered as a body corporate as per section 2(d) of the LLP Act, 2008 and hence RCM would not be applicable on security services provided by an LLP. This ruling does not seem to be in consonance with the above explanation and needs a reconsideration.

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