GST: Security Services provided by LLP not to be covered under RCM, rules AAR [Read Order]

The Authority of Advance Rulings (AAR) in Haryana recently clarified that, Security Services provided by a Limited Liability Partnership are not taxable under Reverse Charge Mechanism (RCM).

The applicant who seeked the ruling was registered under the Goods and Services Tax(GST) Act, 2017 as a Limited Liability Partnership engaged in providing security services to other businesses. The applicant, AS & D Enterprise LLP seeked an Advance Ruling at the Haryana AAR under the Section 97(2) of the Central Goods and Services Tax Act(CGST Act), 2017.

The security services provided by the LLP 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.

The applicant argued that, as per the Section 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.

The AAR, however observed that, from the LLP Act, 2008 the main features inter alia are that the LLP shall be a body corporate and a legal entity separate from its partners.

The Authority consisting of Mr. Sunder Lal and Mr. Kumud Singh ruled, on the basis of the clarification that LLP shall be a body corporate, 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).

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