GST on Security Services

Security services are generally defined as the services that are furnished for the protection of any person or property by an individual or a firm. The security of a property includes tangible as well as intangible property. Security services were initially not defined within the CGST Act of 2017 and were considered as a forward charge. It was taken under Reverse Charge Mechanism (RCM) in January 2019. 

 

Under RCM on security services, the recipient is liable to pay GST on security services on the supply of any security-related goods and services instead of the supplier. 

The GST council is responsible to take necessary measures regarding the GST rate on security services. The council proposed a Service Accounting Code (SAC) to fix the GST rate on security services. The SAC code is a classification method used by the Service Tax Department of India to charge service tax on different types of services rendered in India. 

 

There are five different tax slabs 0%, 5%, 12%, 18% and 28% falling under GST on the services department. Check out the table below to find out more about the applicable Service Accounting Code:

According to the GST Council, GST on security services will be levied at a fixed rate of 18 percent. The individual paying RCM on security services must ensure systematic GST invoice submission mentioning SAC details along with mandatory documents.

RCM on security services is applicable only when the service is rendered to a registered person, or the supplier is not a corporate body. For example, Mittal & Sons is a sole proprietor category or a partnership category firm supplying security services to registered individuals. In such a case, all registered individuals are liable to pay RCM on security services.

 

However, in the case of a Private Limited Company, the recipient of services is not liable to pay RCM on security services. For example, Sun Private Limited Company renders security services to its customers. When it comes to taxation of these services, instead of reverse charge, forward charges will be applicable on the services rendered by the company.

 

Important Points Regarding RCM Applicability on Security Services

• According to Section 2(D) Limited Liability of Partnership (LLP) Act, 2008, an LLP is considered a corporate body.

• In situations where the service recipient is not a registered person, the GST on security services is to be borne by the supplier as a forward charge irrespective of whether the supplier is a corporate body or not.

• Individuals must register themselves under the GST Act for RCM applicability on security services.

• The threshold limit of Rs. 20 Lakhs -Rs. 40 Lakhs is not applicable in registered individuals' cases.

• If an individual is registered under Section 10 of the CGST Act of 2017 as a Composition Dealer, RCM on security services will not apply to them.

• RCM liabilities should be discharged in cash. Any adjustments in the available Input Tax Credit are forbidden.

• The supplier of the security goods and services cannot avail of the benefits of the Input Tax Credit in situations where it is the recipient's liability to pay reverse charges.

• The supplier collecting and paying GST on security services does not dispose of the recipient's responsibility of paying RCM on security services. 

The GST council issues certain exemptions for citizens on GST under security services, however, the following exemptions can be availed after MEA issued certificate is reciprocated to the council.

The two types of GST exemptions on security services in India are:

 

• Educational Institutions - The security services furnished to any educational institution are exempted from GST. These services can be in the form of cleaning and housekeeping staff, security guards, etc.

• Special Agents - The security services rendered to any individual or his/her family members working in a foreign diplomatic mission or consular post for the growth and development of the country. 

Security services have a wide market in India, catering to individuals and firms with different needs. The GST rate on security services is fixed at 18% for all citizens. It is important for individuals to be officially registered under the GST Council. The firms rendering security services should have a GSTIN and a security guard service licence. The registration under the GST Council enables the firms and individuals to avail of different tax benefits as well.