In a significant ruling, the Haryana Authority for Advance Rulings ( AAR ) ruled security services by Limited Liability Partnership ( LLP ) to any registered person are not covered under Reverse Charge Mechanism (RCM).
M/s AS&D Enterprise LLP, the applicant is a Limited Liability Partnership Company engaged in the business of providing security services to various business entities situated all over India. The security services are provided in the form of deployment of security personnel to keep wards& watch and providing safety and security of assets/installations/offices/buildings/ properties/equipment etc. of the site or any other locations as may be specified by the recipient.
The applicants believed that under Reverse Charge Mechanism, the liability to pay tax is fixed on the recipient of the supply of goods or services instead of the supplier in respect of notified categories of goods or services. In exercise of the powers conferred by sub-section (3) of section 9 of the CGST Act, the Central Government, vide Notification No. 13/2017-CT(Rate) dated 28.06.2017, notified certain categories of supply of services on which the liability to pay tax is on the recipient of such services under Reverse Charge Mechanism (RCM).
It was evident that the responsibility to pay tax ona reverse charge basis is cast upon the recipient if he receives the notified security services from a person who is not a body corporate.
Explanation (e) to Notification No. 13/2017-CTR, describes the ‘Limited Liability Partnership’ as a partnership firm. Due to the said explanation, there may be a view that tax is to be paid by the recipient under RCM. However, the point to be considered is that entry no. 14 of the said notification does not make any reference to the term ‘Partnershipfirm, ‘Limited Liability Partnership’ or ‘Firm”.
The reverse charge mechanism of levying the tax under the Act will not be applicable. The scope of the applicability of the said notification is that the RCM is relevant only when the security services are provided to a registered person and only when the supplier of services is any person other than a body corporate.
A two-member bench comprising Sunder Lal and Kamud Singh observed that an LLP is a Body Corporate for the Companies Act, 2013 and the same would apply to the term body corporate for notification no. 13/2017-CGST(Rate) dated 28.06.2017 and as amended on 31.12.2018 vide notification no. 29/2018.
The Authority ruled that an LLP is a body corporate and so excluded from entry no. 14 of notification no. 13/2017 dated 28.06.2017 and notification no. 29/2018 dated 31.12.2018. The applicant is required to charge applicable tax on the security services supplied by him as per section9(1) of the CGST/HGST Act, 2017 read with the relevant provision of the IGST Act, 2017.
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