Security service is a service wherein a person supplies security personnel to another person for a consideration. In Service tax regime, security services provided by individual, HUF or partnership firm to a body corporate were covered under Reverse Charge Mechanism (RCM). In Goods & Services Tax Act, 2017, the concept of RCM on security services was no longer be implemented and the supplier of security service was made liable to pay GST.

However, such service has been retrieved under the purview of RCM due to the Notification No. 29/2018 – Central Tax (Rate) dated 31stDecember, 2018. By such notification specified security services provided by a person other than body corporate to a registered person is under the purview of RCM. The relevant extract of the notification is given as under:

“Security services (services provided by way of supply of security personnel) provided to a registered person:

Provided that nothing contained in this entry shall apply to, –

(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 services; or

(ii) a registered person paying tax under section 10 of the said Act.

In this case, the supplier of service is any person other than a body corporate and the recipient of service is a registered person located in the taxable territory.”

As per the notification, the service recipient would be liable to pay tax under RCM w.e.f. 1^st January, 2019. During the transition phase i.e. in cases, wherein security service has been rendered up to 31st December, 2018, however, neither the invoice has been issued nor payment has been received till that date, the TOS provision shall be applicable.

In order to elucidate the above surfaced issue, let us dive into the provisions of GST Act, 2017 (CGST/SGST Act). Section 9(1) of the Act states that GST is levied on ‘supply’ and shall be paid by a taxable person. In case of supply of services, the time at which the liability to pay tax arises is determined as per the provisions contained in Section 13 of the Act: Time of Supply of services. The relevant extract of the Section is reproduced as below:

“Time of supply of services

(1) The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of this section.

(2) The time of supply of services shall be the earliest of the following dates, namely:

(a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or

(b) the date of provision of service, if the invoice is not issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or

(c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply:

(ii) …..

        Explanation for the purposes of clauses (a) and (b)–

(i) the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment;

(ii) …..

(3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely:

(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:”

 In the instant case, the Government brought into effect reverse charge on security services w.e.f. 01st January, 2019, meaning thereby from the said date, the time of supply of security service would be governed by Section 13(2). Hence, in case any of the conditions prescribed under Section 13(1) gets fulfilled up to 31st December, 2018, the supplier of the service would pay tax. The cases wherein supply was completed by 31st December, 2018, however neither of the condition of Section 13(1) got satisfied up to 31st December, 2018, the provisions of Section 13(2) pertaining to time of supply of services covered under RCM would apply and the recipient would pay tax accordingly.

To illustrate, in a monthly retainer agreement of security service, the supplier raises invoice on every 10th of the month succeeding the month of rendering service and receives payment thereafter. For the services rendered during December, 2018 the invoice would be raised on 10th, January, 2019 and payment would be received thereafter. In such a case, RCM would apply and the service recipient would be liable to pay tax at the time of supply as determined under Section 13(2).