GST on Security Guard Wages & Establishment Charges: AAR Ruling

The case involved the issue of whether GST should be charged on establishment charges only after abatement of wages paid to security guards and the eligibility of the applicant to take GST credit under this method. The Authority for Advance Ruling (AAR) determined that GST should be charged on the entire amount received from clients, including wages and establishment charges, at the rate of 18%. The AAR clarified that following this method would make the applicant eligible to take GST credit, provided they comply with the conditions and provisions of the CGST Act, 2017, and CGST Rules, 2017.

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Issues Involved:
1. Whether GST @18% should be charged only on establishment charges after abatement of wages paid to security guards.
2. Eligibility to take GST credit if the above method of charging GST is followed.

Issue-wise Detailed Analysis:

Issue 1: Charging GST @18% on Establishment Charges Only
The applicant, M/s. Gujarat Industrial Security Force Society (GISFS), provides security services and charges their clients based on the Minimum Wages Act plus 12% establishment charges. They have been charging GST @18% on the total amount of Rs. 112 (Rs. 100 wages + Rs. 12 establishment charges). GISFS contends that based on various judgments, GST should be charged only on the establishment charges of Rs. 12 and not on the entire amount of Rs. 112.

The Authority for Advance Ruling (AAR) examined the relevant provisions of the Central Goods and Services Tax (CGST) Act, 2017, and the Gujarat Goods and Services Tax (GGST) Act, 2017. The AAR referred to Notification No.11/2017-Central Tax (Rate) dated 28.06.2017, which classifies security services under Heading 9985, Group 99852, and Service code 998529, with a GST rate of 18%.

The AAR reviewed various judgments cited by the applicant, which pertained to the pre-GST era under the Finance Act, 1994. These judgments discussed the aspect of valuation and abatement of reimbursable expenses. However, the AAR concluded that these cases do not hold relevance in the GST era because the CGST Act, 2017, has clear provisions regarding the valuation of supply. Section 2(31) defines 'consideration,' and Section 15 elaborates on the items to be included in the value of supply.

The AAR determined that 'consideration' includes any payment made for the supply of goods or services, and GST should be charged on the entire amount received from clients, including wages and establishment charges. Therefore, GISFS must charge/pay GST @18% on the entire amount of Rs. 112.

Issue 2: Eligibility to Take GST Credit
The second issue pertains to the eligibility of GISFS to take GST credit if they charge GST only on the establishment charges. The AAR clarified that GISFS cannot follow the method of charging GST only on the establishment charges as it would be contrary to Section 15 of the CGST Act, 2017.

However, if GISFS follows the correct procedure of charging GST on the entire amount received from clients (including wages and establishment charges), they would be eligible to take GST credit. This eligibility is subject to the fulfillment of conditions and provisions outlined in the relevant sections and rules of the CGST Act, 2017, and the CGST Rules, 2017.

Ruling:
1. GISFS must charge/pay GST @18% on the entire amount received from their clients, which includes wages and establishment charges.
2. GISFS is eligible to take GST credit if they charge/pay GST on the entire amount received from clients, subject to the fulfillment of conditions/provisions in the CGST Act, 2017, and CGST Rules, 2017.

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