The Authority of Advance Ruling ( AAR ) in West Bengal has ruled that, Goods and Services Tax ( GST ) is applicable on payment received as a bonus paid to security personnel.
The Applicant, stated to be a registered society providing security services and scavenging services to various hospitals under the State Government, the application for Advance Ruling is filed under Section 97(2) (c) & (e) of the GST Act for seeking a ruling on whether it is liable to pay GST on the portion of the payment received on account of the bonus paid or payable to the persons it deploys as security personnel. AAR West Bengal held that the applicant is the employer of the security personnel deployed and is responsible for paying all statutory dues including employer’s contribution to EPF, ESI, etc. Therefore, liable to pay GST on the portion of the payment payable to persons it deploys as security personnel.
The Applicant submits that it supplies security and scavenging services to the Government hospitals, classifying the service under the act. The agreement with Dr R Ahmed Dental College & Hospital is provided to understand the nature of the contracts. The Applicant also provides a few copies of the bills raised on the recipient of its service. The finance audit department clarifies that the monthly charges payable to the private security agencies deployed in govt. Establishments have two parts (1) service charge and (2) security charge. The security charge is the minimum wages for the security personnel their entitlements to ESI, EPF, and bonus as applicable. It is variable according to the minimum wages stipulated by the state government from time to time. The applicant claims the minimum wages employee’s portion of EPF, ESI, etc. on its bill for monthly charges and charges GST on the gross amount including the security charges. The health and family welfare department directs that the contractual security personnel be paid bonus @8.33% once in a year. The applicant makes a separate bill for claiming the bonus amount. No GST is charged on such bills.
The division bench comprising of members Ms Susmita Bhattacharya, Joint Commissioner, CGST & CX Mr. Parthasarathi Dey, Senior Joint Commissioner, SGST observed that the security personnel engaged are at no point employees of the state government. The applicant can recruit, deploy, withdraw or replace any security personnel, provided the recipient kept informed. It is not a manpower recruit agency. The applicant is the employer of the security personnel deployed and is responsible for paying all statutory dues including the employer’s contribution to EPF, ESI, etc. Employer’s contribution to EPF, ESI, and bonus at the rate of Government approved rate; therefore it is the components of the applicant’s expenditure. It is entitled to pass the liability to the recipient who, in terms of the agreement, apparently ready to bear that liability. Such an agreement does not create a master and servant relationship between the recipient of the service and security personnel. the applicant is’ therefore, liable to pay GST on the portion of the payment received on account of the bonus paid or payable to the persons it deploys as security personnel.
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