GST on Security Services – Addition under RCM list – An Analysis
GST on Security Services – Addition under RCM list: Government has introduced reverse charge mechanism in case of supply of security services vide notification no. 29/2018- Central Tax (Rate) dated 31st December 2018. It is an extension of existing RCM list. From 1st January 2019, any registered person receiving security services from any person other than a body corporate is required to pay GST on a reverse charge basis.An exception to this, Government Department/ Establishment/ Agency who have taken registration under GST only for TDS purpose and those paying tax u/s 10 (Composition Scheme) are not required to pay GST on RCM basis.
Point to be noted for above notification
- It is applicable from 1st January 2019. It means if a person other than body corporate is starting the business of supplying security services to only body corporate w.e.f.1st January 2019, not required to get registered under GST.
- It is only for security services (i.e. services provided by way of supply of security personnel) and not for manpower supply services. In service tax regime, both security services and manpower supply services were covered under RCM. In GST regime, Manpower supply service is still under forward charge mechanism.
- A service provider must be other thana body corporate only for qualifying this notification. If a service provideris a body corporate then RCM clause will not apply. It will fall under the forward charge mechanism.
|Service Provider||Service Recipient||RCM Applicability||Liable to Pay GST|
|M/s. Security and Manpower Services (Proprietorship)||Air Asia chemicals Ltd (Company)||Yes||Air Asia Ltd (Company)|
|M/S. Mehta and Patel Security Services (Partnership)||Air Asia chemicals Ltd Company)||Yes||Air Asia Ltd (Company)|
|M/s. Bombay Intelligent Pvt. Ltd (Company)||Air Asia chemicals Ltd Company)||No||Bombay Intelligent Pvt. Ltd (Company)|
As per the notification, Following are not liable for RCM on security services,
(i) (a) a Department or Establishment of the Central Government or State Government or Union territory; or(b) local authority; or(c) Governmental agencies; which has taken registration under the Central Goods and Services Tax Act, 2017 (12 of 2017) only for the purpose of deducting tax under section 51 of the said Act and not for making a taxable supply of goods or –
(ii) a registered person paying tax under section 10 of the said Act. i.e. a composition dealer.
For determination of “Time of supply of Service”, Section 13(1) [forward charge] of CGST act is applicable till 31st December 2018 subject to fulfilment of condition prescribed and section 13(2) [Reverse charge] of CGST act is applicable from 01st January 2019. This can be summarised in the following table for easy understanding,
1. Service supplied before 1st January 2019 (Transitional Phase)
|Supply of Security Service||Invoice Date||Payment Date||Point of taxation (Time of Supply) as per section 13(1)||RCM Applicable|
|31.12.2018||01.01.2019||15.01.2019||01.01.2019 (Invoice or payment, whichever is earlier)||Yes|
|31.12.2018||31.12.2018||15.01.2019||31.12.2018 (Date of Invoice)||No|
|31.12.2018||01.01.2019||31.12.2018||31.12.2018 (Date of payment)||No|
2. Service supplied from 1st January 2019 before 1st January 2019
|RCM is always applicable since P.O.T. (Time of Supply) as per section 13(2) is as follow,|
|(a) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or|
|(b) the date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:|
|Provided that where it is not possible to determine the time of supply under clause (a) or clause (b), the time of supply shall be the date of entry in the books of account of the recipient of supply.|
- Supply of security services to SEZ unit or Developer is always treated as a zero rated supply. No question of RCM applicability will arise.
- HSN/SAC code for security services is 9985 and applicable tax rate is 18%.
- ITC is available for payment made under RCM for security services.
- In invoice, whether RCM is applicable? It is yes if aforesaid condition fulfilled.