RCM ON SECURITY SERVICES
RCM on Security Service– Before entering into this topic let us understand what RCM i.e, Reverse charge mechanism means and how it works.
Reverse Charge: Normally in GST, supplier of the good/services collects the tax from recipient and deposits to government. Whereas under Reverse Charge, Recipient (if registered) of good/services is under obligation to discharge the Taxes to Government on the goods/services received. This concept comes into picture in following circumstances:
- In case of Supply of specific goods/services from an unregistered dealer, registered person is liable to discharge taxes to government.
- Specific goods or services have been issued by CEBC, Trading of such goods/ rendering of services attracts RCM.
- Services through ecommerce operator. Here E-commerce operation is liable to collect GST from customer instead of registered person.
In current topic, we are going to discuss about the GST mechanism on Security charges (involving supply of security personnel to another person for consideration).
After introduction of GST, it is clearly stated that the GST on Security charges is to be charged normally, which means Service provider is liable to collect taxes form recipient and remit the tax to government, Whereas in service tax regime it was covered under reverse charge basis.
But through Notification No. 29/2018-Central Tax (Rate) dated 31.12.2018, Government
has introduced RCM mechanism on security services considering the problems in tax collection from small security service provider. This notification came into force from 01-01-2019 and any registered person receiving security services from any person other than body corporate is liable to discharge tax liability in reverse charge basis thereafter. Provision is as follows:
For instance, A an individual (other than body corporate) provide security service to B. Then GST liability is to be paid by B on Reverse Charge Mechanism.
If A is a body corporate provide security service to B. (then it comes under normal charge) Therefore A will charge GST on invoice & collect it from B then it pays to government.