The Authority of Advance Rulings (AAR) Haryana has in its recent ruling in the case of AS&D Enterprise LLP adjudged that, Security Services provided by a Limited Liability Partnership are not subject to payment of GST under Reverse Charge Mechanism (RCM).
Facts of the case:
The applicant, M/s AS & D Enterprise LLP is engaged in providing security services to other businesses.
The security services provided by the applicant are through security personnel for surveillance and security to assets/installations/offices/buildings/properties/equipment etc. at the locations as may be requested by the recipient companies.
Issue on which ruling was sought:
Whether services (Security services) provided by the applicant LLP are covered by entry 14 of Notification No. 13/2017-CT(Rate) dated 28.06.2017 and liable for tax under reverse charge mechanism or Not?
The applicant argued that, as per the Section 2(98) of CGST Act, “reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both sub-section (3) or sub-section (4) of Section 9, or under subsection (3) or sub-section (4) of section 5 of Integrated Goods and Services Tax Act and that, under Reverse Charge Mechanism, the liability to pay tax is fixed on the recipient of the supply of goods or services instead of the supplier in respect of notified categories of goods or services.
In exercise of the powers conferred upon the Central Government by sub-section (3) of Section 9 of the CGST Act, the Central Government, vide Notification No. 13/2017-CT(Rate) dated 28.06.2017 amended by Notification No. 29/2018 – dated 31.12.2018, through the insertion of Sr. No. 14, notified that Security services (services provided by way of supply of security personnel) provided to a registered person by any person other than a body corporate shall be taxed at 18% on the basis of Reverse Charge Mechanism.
ALSO READ: All about GST under reverse charge mechanism on Security Services
Ruling of AAR:
AAR observed that in order to attract GST under reverse charge mechanism on security services the supplier of service should be a person other than body corporate and that under the LLP Act, 2008 the main features of LLP inter alia are that the LLP shall be a body corporate and a legal entity separate from its partners.
In view of above and considering that LLP is a body corporate the Authority consisting of Mr. Sunder Lal and Mr. Kumud Singh ruled held that Reverse Charge Mechanism was not applicable in this case and tax shall be paid on forward charge basis by the supplier(AS & D Enterprise LLP).
Relevant Statutory provisions:
The relevant part of the RCM Notification No. 13/2017-Central Tax (Rate) dated 28-6-2017 is as under:-
| Sl. No | Category of Supply of Services | Supplier of Services | Recipient of Services |
| 14 | 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. | Any person other than a body corporate | A registered person, located in the taxable territory. |
Meaning of body corporate
Explanation (b) : “Body Corporate” has the same meaning as assigned to it in clause (11) of section 2 of the Companies Act, 2013.
And as per Clause (11) of section 2 of the companies Act, 2013 “body corporate” or “corporation” includes a company incorporated outside India, but does not include- (i) a co-operative society registered under any law relating to co-operative societies; and (ii) any other body corporate (not being a company as defined in this Act), which the Central Government may, by Notification, specify in this behalf;
Meaning of LLP
Explanation (e): A “Limited Liability Partnership” formed and registered under the provisions of the Limited Liability Partnership Act, 2008 (6 of 2009) shall also be considered as a partnership firm or a firm.
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
