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RCM on Security Services Under GST / Security Services under GST / Rate of GST on Security Services / SAC code 998529

In today’s world, security is a major concern. Whether it’s a school, office, hospital, or a factory – security guards are needed everywhere. But did you know that the services provided by security personnel are also taxed under GST? Let’s break it down and understand the rules related to GST on security services in a simple way.

What Are Security Services Under GST?

The GST law does not clearly define the term "security services". However, one of the GST notifications gives a clue. It says that security services mean services provided by way of supply of security personnel.

In short, if a company or individual provides security guards or other similar personnel to another business or organization, it is considered as a security service under GST.

The Oxford Dictionary defines “security” as being safe from danger or threat. So, security services include anything that ensures safety by providing trained people like guards, watchmen, bouncers, etc.

GST Is Applicable on Security Services

Yes, security services are taxable under GST.

This means that when a security agency provides guards or similar services to another company, GST must be paid on that transaction.

Earlier, the supplier (security agency) was responsible for paying GST. But from 1st January 2019, the government made a big change.

Reverse Charge Mechanism (RCM) for Security Services

On 22nd December 2018, in its 31st meeting, the GST Council decided to bring security services under Reverse Charge Mechanism (RCM).

Under RCM, the receiver of the service (not the supplier) has to pay the GST directly to the government.

This change was brought through an amendment in Notification No. 13/2017 – Central Tax (Rate).

Let’s understand what it means and when RCM applies.

Who Pays GST on Security Services Now?

According to Entry 14 of the amended Notification No. 13/2017 – CT(Rate), the following conditions apply:

• Service: Supply of security personnel (guards, etc.)
• Supplier: Any person other than a body corporate (i.e., any firm, proprietorship, LLP, etc., but not a company)
• Recipient: A registered person under GST

If these conditions are met, then the recipient (the business taking the guards) must pay GST under RCM.

Example:

ABC Security Agency (a partnership firm) provides 5 guards to XYZ Pvt Ltd (a registered company under GST). In this case:

• Supplier is not a body corporate
• Recipient is a registered person
• Hence, XYZ Pvt Ltd must pay GST under RCM.

Exceptions – When RCM Does NOT Apply

There are some important exceptions. Even if security services are provided, RCM will not apply in the following cases:

v Exception 1:

If the recipient is any of the following and has registered under GST only for TDS purpose under Section 51:

• Central Government department
• State Government department
• Union territory
• Local authority
• Government agency

They are not considered as “regular” registered persons, so they are excluded from RCM.

v Exception 2:

If the recipient is paying tax under Composition Scheme (Section 10 of CGST Act), then RCM also doesn’t apply.

In both these cases, the supplier has to pay the GST, not the receiver.

Exemption for Educational Institutions

Good news for some schools!

Security services provided to certain educational institutions are fully exempt from GST under Notification No. 12/2017 – CT(Rate), Entry 66.

This exemption applies to services provided to:

• Pre-schools
• Schools up to higher secondary (Class 12)

So, if a security agency provides guards to such schools, no GST is charged at all – not under RCM or otherwise.

v Example:

A security agency gives guards to a government primary school – no GST is applicable, thanks to this exemption.

But note: Colleges and coaching centers do not get this exemption.

Who is a “Body Corporate”?

This term is important because RCM applies only when the supplier is NOT a body corporate.

A body corporate usually means a company registered under the Companies Act. So, if a private limited or public limited company provides security services, RCM does not apply. The company will charge GST in the invoice and pay it to the government.

v Example:

If a security company is a Pvt Ltd, it will charge GST normally (say, 18%) and collect it from the customer.

But if the same services are provided by a partnership firm, and the receiver is registered, then RCM applies.

Rate of GST on Security Services

Security services fall under SAC code 998529, which covers "Other security services."

Generally, the rate of GST on security services is:

• 18% (9% CGST + 9% SGST or 18% IGST)

Place of Supply for Security Services

The place of supply helps in determining whether CGST/SGST (intra-state) or IGST (inter-state) is to be charged.

For security services, no specific rule has been mentioned in the law. So, the general rule under Section 12(2) of the IGST Act, 2017 is applied.

Here’s what it says:

    If the recipient is a registered person:

• The place of supply is the location of the recipient.

    If the recipient is not registered:

• If the recipient’s address is available → Use that address
• If not → Use the location of the supplier

In Summary – When Does RCM Apply on Security Services?

If all above are true – RCM applies and the recipient must pay GST.

Conclusion

Security services are essential for businesses, but they also come with tax responsibilities under GST. Understanding who has to pay GST – the security agency or the customer – depends on the type of business entity and registration status.

• If the security provider is not a company and the recipient is a registered person (not a government dept or composition dealer), then RCM applies.
• In special cases, like services to schools or government bodies, exemptions may apply.

Understanding these basic points will help both security agencies and businesses stay compliant and avoid GST penalties.

Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.