Will the Security Services supplied as in the nature of Pure Services to a Municipal Corporation be granted Exemption from GST under Notification No. 12/2017- Central Tax Rate?

PJ/Case Law/2018-2019/3508

Case: NATIONAL SECURITY SERVICES

Citation: 2019 (20) G.S.T.L. 457 (A.A.R. - GST)

Issue: Will the Security Services supplied as in the nature of Pure Services to a Municipal Corporation be granted Exemption from GST under Notification No. 12/2017- Central Tax Rate?

Brief Facts: The applicant has entered into an agreement with Pimpri Chinchwad Municipal Corporation (PCMC) to provide Security services to them. The Security Services are provided in form of providing Security guards; to Water Pump Houses, Purification Plants run by PCMC from where water supply is made to the city; to Hospitals and Dispensaries run by PCMC; for Solid Waste Management, Slum Improvement undertaken by PCMC; in relation to Urban Planning including Town Planning, which is for Public Safety at large.

Appellant Contention: The Appellant is of the view that all the Services that they provide to PCMC are covered in Article 243W of the Constitution, as functions entrusted to Municipality. The applicant has stated that the security guards provided by them are working under the overall supervision of the Security Guards, who are on the establishment of the PCMC and they are carrying out the entire function of the security. They have also cited the duties which are performed by their personnel when on duty under the PCMC. Moreover, the security guards provided by them are not mere assistants/helpers because they are fully responsible for the security of the entire premises and are also supposed to handle the emergency situation like fire, theft, etc., and are to coordinate with important organization like police, fire brigade, hospitals, etc.

According to the Appellant, the term “Madatnis” i.e. assistant/helper used in the agreement is only a convenience term used by PCMC. It is to indicate that the Security Guards provided by them should work under the direction and supervision by PCMC. The Appellant has submitted a clarification from the Assistant Commissioner (Security) PCMC, Pune-411018 stating that even though the persons provided by the applicant are working under the supervision and directions of the security guards who are on the establishment of PCMC, such persons are doing the security work in relation to urban planning and public safety at large.

Respondent’s Contention and Reasoning of Judgment: The Respondent stated that before making any conclusion, it is necessary to study and then analyze the relevant Exemption Notification. Following is the extract of the same.

Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution would be exempted.

It is thus clear that the applicant is providing pure services. The Respondent agreed that the said services are in relation to any functions entrusted to a Municipality under Article 243W of the Constitution. The agreement between the applicant and PCMC very clearly states that the applicant shall provide assistants to the Security Guards of PCMC. The invoice raised by the applicant mentions services rendered as, “Being round the clock helper to security service”. Providing assistance to the Security Guards of PCMC is an activity in relation to various functions as enumerated above which have been entrusted to a Municipality under Article 243W of the Constitution. Thereby the appellant is entitled the benefit of Exemption Notification.

Decision: Exemption allowed.

Comment: The Gist of the case is that the Security Services supplied as in the nature of Pure Services by the appellant to PCMC (a Municipal Corporation) will be granted Exemption from GST under Notification No. 12/2017- Central Tax Rate. Recently Notification No. 29/2018-Central Tax (Rate), dated 31-12-2018 was issued wherein it has been stated that Security Service (services provided by way of supply of security personnel) provided by any person other than a body corporate to a registered person, located in the taxable territory would attract tax liability under Reverse Charge Mechanism. However, Since PCMC is municipality (a government structure); the said notification would not be applicable to it.

In a similar case of supplying security services i.e. in case of Ex-Servicemen Resettlement Society, [2019] 101 taxmann.com 477 (AAR-WEST BENGAL) was supplying Security Guards along with sweeping services to Medical colleges and Hospitals of West Bengal and Central Govt. Cancer Institute. In view of the foregoing Benefit of exemption from the payment of GST is not available to the Applicant under Notification No 12/2017-CT(Rate) dated 28.06.2017 and WB Govt Gazette Notification-1136-FT dated 28.06.2017, as amended, for the supply of Security Services and the bundle of service that he describes as ‘Scavenging Services’.

Prepared by: Adit Gupta

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PJ/Case Law/2018-2019/3508

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