GST : Reverse Charge Mechanis & Security services availed of by University

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GST : Reverse Charge Mechanis & Security services availed of by University

IN THE AUTHORITY FOR ADVANCE RULING–CHHATTISGARH BENCH

KALPANA TIWARI, MEMBER (STATE TAX) & RAJESH KUMAR SINGH, MEMBER (CENTRAL TAX)

Hemchand Yadav Vishwavidyalaya, In re

Order No. STC/AAR/04/2019-Raipur

24 September, 2019

ORDER

Proceedings : The applicant Hemchand Yadav Vishwavidyalaya. Durg (C.G.) (GSTIN-22AAAJH0647Q1DD) has filed the application under section 97 of the Chhattisgarh Goods and Services Tax Act, 2017 requesting advance ruling regarding applicability of GST under Notification No. 29/2018–Central Tax (Rate), dated 31-12-2018 on service provider for providing security service to University.

  1. Facts of the case :–

(I) The applicant hereinafter referred to as Hemchand Yadav Vishwavidyalaya, Durg (C.G.) (GSTIN-22AAAJH0647Q1DD) had invited a tender on 30-1-2019 for providing security services to their University.

(II) Eight firms had quoted their bids for providing security services. All the firms had quoted their financial bid rates along with 18% GST except one firm named M/s. Ex-Man Security Service. Bilaspur (C.G.) which had quoted its financial bid rate without any GST.

(III) The above firm M/s. Ex-Man Security Service, Bilaspur (C.G.) in response to the query by the applicant regarding non-inclusion of GST in its financial bid submitted a written response. The above firm asserted that its financial bid rate would be L-1 because of non-inclusion of GST in its bid rate. It stated that the institution receiving security services would have to pay applicable GST on. account of GST memo issued by the central government as on 1-1-2019 and that moreover educational institutions are exempted from payment of GST as per the government rules. It was further contended that the above firm M/s. Ex-Man Security Service, Bilaspur (C.G.) is providing security services to the Government Engineering College and Pt. Sunderlal Sharma University as per the above provisions, it has also referred to Notification No. 29/2018–Central Tax (Rate), dated 31-12-2018 and a letter regarding the main decisions taken by the GST Council.

  1. Contention of the Applicant :–

The applicant has mentioned following details regarding the case–

(i) The applicant had invited a Notice Inviting Tender (NIT) No. 308/HYV-Dev/2019, dated 30-1-2019 with regard to provision of security services to the University in which eight firms had participated and submitted their financial bids.

(ii) On opening the financial bids by the empowered committee on 28-2-2019 it was noticed that seven firms have quoted their financial bid rates taking into consideration the applicable GST @ 18%.

(iii) But one firm M/s. Ex-Man Security Service, Bilaspur (C.G.) submitted its financial bid rate without including any GST citing the rules of Central Government, dated 1-1-2019 in which the service recipient is liable to pay the applicable GST.

(iv) The applicant wants advance ruling regarding the applicability of GST under Notification No. 29/2018–Central Tax (Rate), dated 31-12-2018 on service provider providing security services to the university registered as a Tax Deductor.

(v) The applicant interprets that the above notification has a proviso which says that the services provided to the department of government, local authorities, government agencies which are registered under section 51 for the purpose of deducting tax and not for making taxable supplies are exempt from the payment of GST. The applicant’s contention is that the security services provided to University is not exempt from GST and accordingly the security service provider firms should include GST in their bills.

  1. Personal Hearing :–

Keeping with the established principles of natural justice, personal hearing in the matter was extended to the Authorised Representative of the applicant and accordingly, Shri H.S. Baghel (Dealing Assistant) and Ms. B. Jyoti (Dealing Assistant), Account section of the University appeared before us for hearing on 23-8-2019 and reiterated their contention. They also furnished a written submission, dated 23-8-2019 which has been taken on record.

The applicant reiterated their contention and desired clarification regarding applicability of GST on their service providers for providing security service to the university in terms of GST Notification No. 29/2018–Central Tax (Rate), dated 31-12-2018, it was their contention that the above notification has a proviso which says that the services provided to the department of government, local authorities, government agencies which are registered under section 51 for the purpose of deducting tax and not for making taxable supplies are exempt from the payment of GST. They submitted that the security services provided to university is not exempt from GST and the security service provider firms should include GST in their bills.

  1. The legal position, Analysis and Discussion :–

5.1 The provisions for implementing the CGST Act and CGGST Act, 2017 are similar. Now we sequentially discuss the provisions that are applicable in the present case.

The applicant wants clarification as regards the applicability of GST under Notification No. 29/2018–Central Tax (Rate), dated 31-12-2018 on service provider, engaged in providing security service to University. Thus we have to analyse all the related aspects of the above notification like reverse charge, meaning of government department or establishment, GST liability on educational services, registration status of the applicant as a Tax Deductor under section 51 of CGGST Act, 2017 and/or as a regular taxpayer.

5.2 Status of applicant :–

Hemchand Yadav Vishwavidyalaya or Hemchand Yadav University formerly Durg Vishwavidyalaya. is a State University in Durg, Chhattisgarh, India. The University has come into existence after the bifurcation of existing Pandit Ravishankar Shukla University, Raipur in 2015. The University was later renamed as Hemchand Yadav Vishwavidyalaya. The jurisdiction of the University comprises of various affiliated colleges situated in the districts of Durg, Bemetara. Balod, Rajnandgaon and Kabirdham of Chhattisgarh State. His Excellency Governor of Chhartisgarh is the Chancellor of the University. Thus Government of Chhattisgarh. exercising its power enacted Chhattisgarh Act (No. 16 of 2015). the Chhattisgarh Vishwavidyalaya (Sanshodhan) Adhiniyam, 2015, dated 24-4-2015 and thereafter further amending the Chhattisgarh Vishwavidyalaya Adhiniyam, 1973 (No. 22 of 1973). has established Hemchand Yadav Vishwavidyalaya Durg (C.G.).

5.4 Status of GST Registration of the applicant : The applicant is registered with GST holding GSTIN-22AAAJH0647Q1DD as a Tax Deductor under section 51 of the CGGST Act, 2017 with effect from 4-12-2018.

Thereafter, the applicant had also obtained another GSTIN22AAAJH0647Q1Z4 as a regular dealer with effect from 25-6-2019 for the purpose of sale of scrap papers, providing consultancy services, renting of part of university building for bank, post office, canteen, etc.

Thus the applicant is registered dealer having GSTIN-22AAAJH0647Q1DD as a Tax Deductor till 24-6-2019 and is registered both as a Tax Deductor and as a normal Taxpayer after 24-6-2019.

5.5 Reverse Charge : Reverse Charge has been defined under section 2(98) of CGGST Act, 2017 and 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 under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or sub-section (4) of section 5 of the Act.

5.6 Notification No. 12/2017–Central Tax (Rate), dated 28-6-2017 : As per Serial No. 66 of Notification No. 12/2017–Central Tax (Rate), dated 28-6-2017 the supply in respect of Heading 9992 is exempt viz. the Intra-State supply of Services to/by an educational institution mentioned in the table to the said notification as below–

The services provided–

(a) by an educational institution to its students, faculty and staff;

(b) to an educational institution, by way of–

(i) Transportation of students, faculty and staff;

(ii) catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory;

(iii) security or cleaning or house-keeping services performed in such educational institution;

(iv) services relating to admission to. or conduct of examination by, such institution; up to higher secondary :–

Provided that nothing contained in entry (b) shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent.

Thus it gets amply clear that the services provided to an educational institution with regard to security services would be tax exempt in case educational institution is providing schooling till higher secondary. However, in case the same Security services are provided to educational institution providing higher education then it would be taxable under GST.

Another aspect to be evaluated is regarding tax liability on provision of security services under forward charge or reverse charge in the light of Notification No. 29/2018–Central Tax (Rate), dated 31-12-2018.

5.7 Notification No. 29/2018–Central Tax (Rate), dated 31-12-2018 : The Notification No. 29/2018–Central Tax (Rate), dated 31-12-2018 further amends the Notification No. 13/2017–Central Tax (Rate), dated 28-6-2017 which enlists the category of supply of services on which the applicable tax will be paid on reverse charge basis by the recipient of such services and not by supplier of service under forward charge. Serial No. 14 of Notification No. 29/2018–Central Tax (Rate), dated 31-12-2018 mentions the reverse charge mechanism with regard to security services provided to a registered person which specifies as under

Sl. No. Category of supply of Services Supplier of service Recipient of Service
(1) (2) (3) (4)
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.”

5.8 Report of Jurisdictional Circle Officer : In response to the Letter No. 7791, dated 9-7-2019 issued by this office, the concerned jurisdictional officer vide Letter No. 1448, dated 2-8-2019 submitted the report regarding its perspective on the above issue and for the sake of brevity the same is reproduced hereunder :–

REPORT

This report is with reference to the application for advance ruling received from Hemchand Yadav Vishwavidyalaya Durg whereby the applicant sought advance ruling on whether GST Notification No. 29/2018 is Applicable on Service provider for providing security services to university.

Furthermore Notification No. 29/2018–Central Tax (Rate), dated 31-12-2018 is issued under sub-section (3) of section 9 of CGST on which liability to pay tax under reverse charge basis on certain specified supplies of services lies with the recipient of services. Relevant part of the aforesaid notification i.e. serial no. 14 and its entry related to the impugned question is reproduced here.

Sl. No. Category of supply of Services Supplier of service Recipient of Service
(1) (2) (3) (4)
14 Security services, (services provided by way of supply of security personnel) provided to a registered person :–

Provided that nothing 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.

Any person other than a body corporate A registered person, located in the taxable territory.

Proviso clearly elaborates that anything contained in entry 14 shall not apply to department or establishment of central or state, local authority or Govt, 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.

In light of said notification and in present question, it was opined by the jurisdictional field formation that the Recipient of services i.e., Hemchand Yadav Vishwavidyalaya Durg, GSTIN 22AAAJH0647Q1DD registered under section 51 of the CGST and SGST Act and not having another GSTIN as supplier of goods or services till 24-6-2019. Also it being a establishment of the state govt.; attracts proviso to the said notification hence Hemchand Yadav Vishwavidyalaya Durg is not liable to pay tax under reverse charge basis for availment of security services rather it would be payable by the registered supplier of services on forward charge basis till 24-6-2019 but from 25-6-2019 applicant dealer got registered as supplier of goods or services having another GST No. 22AAAJH0647Q1Z4. Hence the said proviso does not applicable from 25-6-2019 onwards and applicant would be liable for payment of tax under Reverse Charge Basis.

5.9 Conclusion : Thus from the facts and circumstances of the issue in hand we come to the considered conclusion that the applicant being only registered as a Tax deductor under section 51 of the CGST and CGGST Act holding GSTIN-22AAAJH0647Q1DD till 24-6-2019 and having no other GSTIN as supplier of goods or services, would not be liable for GST under reverse charge, in view of the exclusions as stipulated under proviso to Notification No. 29/2013–Central Tax (Rate), dated 31-12-2018. The liability to GST in such case would be with the service provider viz. the security agency under Forward charge. However with effect from 25-6-2019. the applicant having been registered as a regular dealer and normal taxpayer, holding another GSTIN-22AAAJH0647Q1Z4, would be liable to GST under Reverse charge being the recipient of supply of Goods or Services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act. It is also noteworthy to mention here that the applicant is not engaged in providing services by way of pre-school education and education up to higher secondary school or equivalent.

  1. In view of the deliberations and discussions as above, we pass the fallowing order :-

ORDER

  1. The ruling so sought by the Applicant is accordingly answered as under :–
  2. The applicant being only registered as a Tax deductor under section 51 of the CGST and CGGST Act holding GSTIN-22AAAJH0647Q1DD and not having any another GSTIN as supplier of goods or services till 24-6-2019 would not be liable for under reverse charge, in view of the exclusions as stipulated under the proviso toNotification No. 29/2018–Central Tax (Rate), dated 31-12-2018. The liability to GST payment in such case would be with the service provider under Forward charge.
  3. However with effect from 25-6-2019, the applicant having been registered as a regular dealer and normal taxpayer, holding another GSTIN22AAAJH0647Q1Z4 would be liable to tax under Reverse charge being the recipient of supply of Goods or Services or both under’ sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act.

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