RCM on security services under GST with example

What is Reverse Charge Mechanism (RCM)?

Under the normal (forward-charge) GST regime, the supplier of goods or services collects GST from the recipient and remits it to the government. In contrast, under the Reverse Charge Mechanism (RCM), the recipient of the goods or services is obligated to pay the GST directly to the government, rather than the supplier doing so.

The rationale behind RCM is to ensure tax compliance in situations where the supplier may be unregistered or non-compliant, or where it is administratively simpler for the recipient (often being a large business) to handle the GST.

Applicability of RCM to Security Services

According to Notification No. 29/2018 – Central Tax (Rate) dated 31 December 2018, security services supplied by a person other than a body corporate to a registered person are taxable under RCM. In other words:

If a business (registered under GST) obtains security services from an individual or a partnership/firm (i.e. non-corporate), that business (the recipient) is liable to pay GST under reverse charge.
But if the security service provider is a body corporate (for example, a private security company registered as a company), then the normal (forward) charge applies — the supplier collects GST and remits it.
Also, if the recipient is unregistered or the supplier is a corporate, RCM would not apply as per the notification.

Thus, among security service providers:

Individual / Partnership / HUF (non-corporate) supplying security services to a registered person → RCM applies.
Body corporate (company / corporate entity) supplying security services → forward charge (supplier pays GST) applies.

This ensures that in cases where the supplier is smaller or less formal, the tax liability is shifted to the recipient, who is assumed to have more administrative capacity to handle GST.

Rate of GST under RCM on Security Services

Where RCM is applicable for security services (i.e. provider is non-corporate and recipient is registered), the rate of GST applicable is 18% (Central + State/UT, as relevant).

Thus the recipient will self-assess the 18% GST on the taxable value of the security services and pay the tax directly.

Impact on the Recipient (Registered Person)

When a registered person avails security services under RCM:

Self-assessment: The recipient must compute the GST liability — 18% on the taxable base.
Payment: The recipient pays the GST directly to the government (through the electronic portal).
Record keeping: The recipient must maintain proper documentation — the invoice from the service provider (without GST, since the provider may not charge GST), their own computation of GST, payment proof, etc.
Input Tax Credit (ITC): The recipient may claim input tax credit for the GST paid under RCM, subject to the regular conditions of ITC under GST law (i.e., the services must be used in the course of business, no blocked credits, etc).

So, even though the recipient is paying the GST, they can (if eligible) offset it against their output GST liability.

Summary Table: Who Pays GST for Security Services (RCM or Forward)

Service Provider Type	Service Recipient Type	Who Pays GST	Remarks
Individual / Partnership / HUF (non-corporate) → Registered Person	Registered Person	Recipient (under RCM)	All conditions satisfied → RCM applies
Body corporate supplier → Registered Person	Registered Person	Supplier (forward charge)	Because supplier is a “body corporate” → RCM does not apply
Any supplier → Unregistered Person	Unregistered Recipient	Supplier (forward charge)	RCM not applicable when recipient is unregistered

Expanded Article: RCM on Security Services under GST (with Examples)

To further clarify, here’s a more thorough take on RCM in relation to security services, with examples to illustrate how it works in practice.

Legal Basis & Scope

The authority for imposing RCM for security services comes from the GST Notifications (notably Notification No. 29/2018 (Central)) which specify services on which reverse charge applies, and the conditions under which it applies (supplier type, recipient type, etc). The general GST law (CGST Act, IGST Act, State GST Acts) also provides for RCM in specific cases.

The key conditions are:

Supplier must be non-corporate (individual / firm / HUF / partnership), not a body corporate.
Recipient must be a registered person under GST.
The service must fall into the category specified (in this case, “security services”).

If all these are met, the recipient must account for GST via RCM.

What is “Security Service”?

In the context of GST, security services typically include services such as:

Guarding services (physical security),
Security personnel deployment,
Surveillance,
Manpower for security at premises,
Monitoring and control room services related to security, etc.

These are treated as “service” under GST law and thus attract service tax / GST treatment.

Computation & Invoicing under RCM

The supplier (non-corporate individual or firm) issues an invoice without GST (i.e. invoice showing only the base amount), since the supplier is not collecting GST.
The recipient adds the 18% GST on that base amount (self-assessed) and pays it to the government.
The recipient can then claim ITC for that paid GST (if eligible) in their returns.
In returns (e.g. GSTR-3B / GSTR-2 / GSTR-9, depending on the structure), the recipient will report this RCM liability and the ITC claim.

Examples

Let’s look at illustrative scenarios:

Example 1: Security service by individual to registered company (RCM applies)

Supplier: Mr. X, an individual (non-corporate), provides guarding services to a business.
Recipient: ABC Pvt Ltd, registered under GST.
Service value: ₹100,000 for security services in a month.
GST rate: 18%.

Because the supplier is non-corporate and the recipient is registered, RCM applies.

Computation:

Taxable base = ₹100,000
GST (18%) = ₹18,000
PQR Pvt Ltd (the recipient) pays ₹18,000 GST to government.
PQR Pvt Ltd may claim this ₹18,000 as ITC (if otherwise eligible).

So, Mr. A’s invoice to PQR would simply be:

Invoice:
Service: Guarding/Security services
Amount (base) = ₹100,000
GST = 0 (since he doesn’t charge GST)
Total = ₹100,000

Meanwhile, PQR must self-assess and pay ₹18,000 to the government and record it in their books.

Example 2: Security service by corporate security firm to registered business (Forward charge)

Supplier: Delta Pvt Ltd (a corporate entity), provides security services to ABC Ltd (registered).
Service value: ₹200,000.
GST rate: 18%.

Here, because the supplier is a corporate entity, RCM does not apply. Instead, forward charge applies:

Delta Pvt Ltd issues invoice with GST:

Base amount = ₹200,000
GST (18%) = ₹36,000
Total invoice = ₹236,000

Delta Pvt Ltd collects ₹36,000 from ABC, remits it to government.
ABC (recipient) can claim ITC of ₹36,000 (provided it meets eligibility).

Example 3: Security services to unregistered recipient (RCM not applicable)

Supplier: Mr. , individual, provides security service to a small shopkeeper who is not registered under GST.
Recipient: Unregistered.
Service value: ₹50,000.

Because the recipient is unregistered, RCM does not apply regardless of who the supplier is. The supplier must charge GST (if registered). If the supplier is unregistered and cannot charge GST, then no GST is collected. The transaction is outside the GST mechanism in that respect.

Key Practical Notes & Compliance Requirements

Record-keeping & documentation

The recipient must maintain proper documentation:
Invoice from supplier (without GST),
Internal calculations showing how RCM liability was computed,
Proof of GST payment (challan / electronic payment),
Entries in accounting books showing the tax paid and ITC claimed.

Timely filing & payment
The recipient must include the RCM GST liability in the appropriate return (e.g. GSTR-3B or equivalent) and pay the tax by due date, to avoid interest/penalties.
ITC claim subject to conditions
Just because the recipient pays GST under RCM doesn’t automatically mean ITC. The normal conditions for claiming ITC must be met (such as usage in business, invoice in proper name, time limit, no blocked credits, etc.).
Segregation in returns
In GST returns, there are special fields for reporting tax liabilities under reverse charge and ITC claims for RCM payments. The compliance software or return forms have designated sections.
Awareness & training
Businesses procuring security services must be aware of this RCM provision; otherwise, they may fail to pay tax or claim credit properly, leading to assessments, penalties, or interest.

RCM on security services under GST with example