The Central Association of Private Security Industry (CAPSI) has written to Prime Minister Narendra Modi requesting a re-look at the 18 per cent GST levied on them.
The Association is protesting against application of the Reverse Change Mechanism (RCM) which they claim is unjust.
Under RCM, the GST is paid and deposited with the government by the recipient and not the supplier of goods and services. On the contrary, the normal mechanism of levy of GST puts the onus on the receiver of goods and services for paying taxes to the supplier. Such supplier in turn deposits GST with the government.
Right now, ‘body corporate’ entities in the private security industry are denied benefit of the RCM while the same is granted to proprietary and partnership firms, CAPSI chairman said wrote to PM Modi on August 19, seeking relief under proposed GST reforms.
He told businessline that the CAPSI, comprising mainly of MSMEs and having over 8.5 million workforce, has been fighting this battle since Arun Jaitley was Union Finance Minister between 2014 and 2019.
“We write to you today with a deep sense of frustration and concern. Despite being one of largest employment-generating sectors in the country after agriculture, the Private Security Industry continues to face intractable issues under the GST regime, which have crippled the operational and financial sustainability of our services,” the letter to PM read.
The letter stated that the “arbitrary differentiation has created a glaring disparity within the industry,” where companies performing the same duties and providing the same services are treated unequally under tax law.
Based on the appeals and representations made by the CAPSI, the GST Council during its 31st Meeting held on December 22, 2018, decided to put the security services on RCM, the chairman of the association stated.
However, the notification, issued on December 31, 2018, shockingly did not reflect the Council decision, he informed.
It was made applicable to only security services provided by ‘Any Person other than a Body Corporate’, negating the intent of the decision taken by the GST Council and seriously damaging the economic viability of private security sector, he stated.
We again made representations and protested since what happened between the GST decision and subsequent notification on it is unparalleled. A decision of the Council is final and only they are authorised to review it, he stated.
Distorted competition
He stated that this has not only led to confusion and compliance burdens but has also distorted competition.
“The denial of RCM to body corporates forces them to bear full GST liability upfront, severely impacting their cash flows increasing operational risk-particularly for MSMEs operating with limited working capital,” the letter noted.
A large number are MSMEs and operate on low profit margins of around 5 percent to 10 percent and get delayed payments between 60 to 90 days, from the clients, leaving no option to pay GST before the actual payment receipt, said the CAPSI.
