Will security guards become costlier post GST?
Welcome To CitySpidey

Location

Will security guards become costlier post GST?

The biggest tax reform in the country has brought with it a host of ambiguities. City Spidey delves into a question that will have significant impact on the security and safety of residential societies. Read on.  

Will security guards become costlier post GST?

Post GST — rolled out on July 1 — hiring private watchmen or security guards will become slightly more costly. There’s an extra 3 per cent to be paid against the earlier levy of 15 per cent.

Companies providing private security services now fall under the 18 per cent GST slab.

Here’s how it works out:  

Suppose you were paying a lakh for hiring 10 security guards and Rs 15, 000 as service tax, you are now required to pay Rs 3,000 extra to the company rendering the service.

NP Singh, who runs a security agency in Noida, explained, “The cost of hiring a trained watchman will increase by 3 per cent, as the agency will now be paying government 18 per cent compared to the earlier 15 per cent.”

He continued, “The new levy will impact service-providing companies adversely. The company will have to pay the government the new levy on the basis of bill raised against the services even if the client refuses to make payments later. This will accrue direct losses to the company, which has already paid the GST.”

To avoid paying more, he added, residents could be employing private security guards on their own, but, in all likelihood, they will be untrained.   

He added, “So, the quality of service is impacted. Companies providing security services impart training to its manpower. But when they don’t have that training, it’s clear that the quality of services will see a dip. Employing a trained supervisor will prove costlier too. A trained supervisor will charge Rs 25, 000 as salary, which is costlier compared to services provided by a company.”

But there's always a silver lining.

Under GST, companies will have some respite with the provision of input credit. It means at the time of paying tax on output, you can reduce the tax you have already paid on inputs. This mechanism is available only when you are covered under the GST.

Anirudh Sharma, who also runs a security-service agency, explained, “Suppose, I spent a lakh on the various inputs (such as training), and I raise a bill of Rs 1.8 lakh for my client, I am liable to pay GST on the difference between my input costs and output price, which is Rs 80, 000 in this case.”

Vimal Sharma, RWA president of Sector 50, Noida, said, “I welcome this move, as the GST will help in the growth of the nation. But it may not go down well with most residents, as they will need to shell out a little extra for the maintenance charges to the RWA — as it is a lot of residents don’t pay the existing rates.”

Rajneesh Jain, secretary of ATS Green, a residential society in Sector 50, Noida, said, “We can try and negotiate with the service-providing company to transfer the benefits of input credit to the end-client. If they agree, the burden of paying 3 per cent extra will be reduced to a manageable level.”