GST on Security Services: GST Rate, SAC Code & RCM on Security Services Explained
GST on Security Services: GST Rate, SAC Code & RCM on Security Services Explained
Mar 21, 2024
15 Mins
GST on Security Services: GST Rate, SAC Code & RCM on Security Services Explained
In the world of security services, there have been some recent changes under the Goods and Service Tax (GST) system. Previously, these services were not explicitly defined in the CGST Act of 2017 and were subject to the forward charge mechanism. However, as of January 2019, they have been brought under the Reverse Charge Mechanism (RCM).
Let's delve into the details of the security services GST rate, RCM on security services under GST with examples, the time of supply, and the input tax credit (ITC) on security services.
Under the GST regime, security services are taxed at a rate of 18%. Those responsible for the RCM on security services must ensure that they submit GST invoices systematically, including Service Accounting Code (SAC) details and required documentation.
In the past, security services were not subject to the RCM. Under this system, the supplier would collect tax from the recipient and pay it to the government. However, starting from 1st January 2019, security services were brought under the RCM. This means that any registered person who receives security services from a non-body corporate is now required to pay GST on a reverse charge basis.
There are two exceptions to this rule. Government agencies or local authorities that have obtained GST registration solely for Tax Deducted at Source (TDS) are exempt from RCM. Additionally, individuals or businesses who have chosen to pay tax under the GST composition scheme are also exempt.
It's important to note some key points regarding the applicability of RCM on security services. The threshold limit of Rs.20–40 lakhs does not apply to registered individuals for security services. If the service recipient is unregistered, the supplier bears the GST liability as a forward charge for security services, regardless of their corporate status. The supplier's collection and payment of GST on security services do not relieve the recipient of their responsibility to pay RCM on such services. Individuals need to register under the GST Act for RCM applicability on security services.
When it comes to the SAC code and GST on security services, the SAC code is used to classify various types of services for levying service tax in India. For security services, the SAC code is as follows:
- Investigation services: 998521 with an 18% GST rate
- Security consulting services: 998522
- Security systems services: 998523
- Armoured car services: 998524
- Guard services: 998525
- Training of guard dogs: 998526
- Polygraph services: 998527
- Fingerprinting services: 998528
- Other security services: 998529
The time of supply for security services under RCM is determined based on the earliest of three dates: the date of payment, the date immediately after 60 days from the invoice issue date, or the date of entry in the recipient's books if neither the payment date nor the 60-day period is known.
For example, if security services are provided in August and the payment is made on 10th October of the same year, the time of supply would be the date of payment, which is earlier than the 60-day period.
There are certain cases where GST shall be discharged under the forward charge mechanism instead of the RCM. These include security services provided to unregistered persons, services provided to composition dealers, services provided by a body corporate, and services provided to government agencies registered for TDS.
Regarding input tax credit (ITC) of GST paid on security services, businesses can claim ITC if the security services are obtained for business purposes or taxable supplies. If the supplier is not registered under GST, a self-invoice can be used to claim the ITC.
Some categories of security services are exempt from GST. These include security services provided to educational institutions and security services to individuals working in a foreign diplomatic mission or consular post in India. To claim these exemptions, an MEA-issued certificate must be submitted to the GST Council.
An important recent advance ruling related to GST on security services comes from Haryana AAR. They concluded that Limited Liability Partnerships (LLPs) should be treated as a body corporate for the purpose of taxation. Therefore, the supply of security personnel services by an LLP to a registered person would not be subject to the RCM.
Understanding the intricacies of GST on security services is crucial to ensure compliance and avoid any non-compliance issues. These recent changes highlight the importance of staying updated with GST regulations in order to maintain smooth operations in the security services sector.
GST on Security Services: GST Rate, SAC Code & RCM on Security Services Explained
In the world of security services, there have been some recent changes under the Goods and Service Tax (GST) system. Previously, these services were not explicitly defined in the CGST Act of 2017 and were subject to the forward charge mechanism. However, as of January 2019, they have been brought under the Reverse Charge Mechanism (RCM).
Let's delve into the details of the security services GST rate, RCM on security services under GST with examples, the time of supply, and the input tax credit (ITC) on security services.
Under the GST regime, security services are taxed at a rate of 18%. Those responsible for the RCM on security services must ensure that they submit GST invoices systematically, including Service Accounting Code (SAC) details and required documentation.
In the past, security services were not subject to the RCM. Under this system, the supplier would collect tax from the recipient and pay it to the government. However, starting from 1st January 2019, security services were brought under the RCM. This means that any registered person who receives security services from a non-body corporate is now required to pay GST on a reverse charge basis.
There are two exceptions to this rule. Government agencies or local authorities that have obtained GST registration solely for Tax Deducted at Source (TDS) are exempt from RCM. Additionally, individuals or businesses who have chosen to pay tax under the GST composition scheme are also exempt.
It's important to note some key points regarding the applicability of RCM on security services. The threshold limit of Rs.20–40 lakhs does not apply to registered individuals for security services. If the service recipient is unregistered, the supplier bears the GST liability as a forward charge for security services, regardless of their corporate status. The supplier's collection and payment of GST on security services do not relieve the recipient of their responsibility to pay RCM on such services. Individuals need to register under the GST Act for RCM applicability on security services.
When it comes to the SAC code and GST on security services, the SAC code is used to classify various types of services for levying service tax in India. For security services, the SAC code is as follows:
- Investigation services: 998521 with an 18% GST rate
- Security consulting services: 998522
- Security systems services: 998523
- Armoured car services: 998524
- Guard services: 998525
- Training of guard dogs: 998526
- Polygraph services: 998527
- Fingerprinting services: 998528
- Other security services: 998529
The time of supply for security services under RCM is determined based on the earliest of three dates: the date of payment, the date immediately after 60 days from the invoice issue date, or the date of entry in the recipient's books if neither the payment date nor the 60-day period is known.
For example, if security services are provided in August and the payment is made on 10th October of the same year, the time of supply would be the date of payment, which is earlier than the 60-day period.
There are certain cases where GST shall be discharged under the forward charge mechanism instead of the RCM. These include security services provided to unregistered persons, services provided to composition dealers, services provided by a body corporate, and services provided to government agencies registered for TDS.
Regarding input tax credit (ITC) of GST paid on security services, businesses can claim ITC if the security services are obtained for business purposes or taxable supplies. If the supplier is not registered under GST, a self-invoice can be used to claim the ITC.
Some categories of security services are exempt from GST. These include security services provided to educational institutions and security services to individuals working in a foreign diplomatic mission or consular post in India. To claim these exemptions, an MEA-issued certificate must be submitted to the GST Council.
An important recent advance ruling related to GST on security services comes from Haryana AAR. They concluded that Limited Liability Partnerships (LLPs) should be treated as a body corporate for the purpose of taxation. Therefore, the supply of security personnel services by an LLP to a registered person would not be subject to the RCM.
Understanding the intricacies of GST on security services is crucial to ensure compliance and avoid any non-compliance issues. These recent changes highlight the importance of staying updated with GST regulations in order to maintain smooth operations in the security services sector.
Author
Pluto Team
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