service tax on security agency service

1.      Security agency service

1.1.     Definition of security agency service:

 As per rule 2(fa) of service tax rule, 1994, security services means services relating to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity.

1.2.     Reverse charge mechanism on supply of manpower:

 As per notification 30/2012-ST dated 20.6.2012, In respect of services provided or agreed to be provided of supply of manpower service, the liability pay service tax would be as follows:

Taxable Service	Provided by	Provided to	Percentage of service tax payable by the person providing service	Percentage of service tax payable by the person receiving the service
services provided by way of security service	·   Individual ·   HUF ·   proprietary firm ·   partnership firm ·   AOP	·   Company ·   LLP	25%	75%

1.3.     Valuation of security services:

As per letter no F. No. B. 11/1/98-TRU dated 7-10-1998 - service tax is leviable on the entire amount charged by the security agency to its clients to whom security guards/personnel have been provided as the bulk of charges represent salary to the employee, employee’s ESI and EPF contribution, income tax deducted at source, payment towards professional tax, labour welfare fund and other non-statutory charges such as bonus, leave and other expenses. The abatement in respect of statutory levies and taxes can be granted provided the same has direct relation with the services rendered to the client, billed to the client and is reimbursable by the client on actual basis. These statutory levies are required to be borne by all types of employers and not just security agencies. Such statutory levies have no direct co-relation with the services rendered to the client. It has been clarified that no abatement in respect of such statutory levies is admissible for the purposes of computing the service tax liability.
As per following judgments, service tax is payable on gross amount charged by security agency to client including salary of gaurds, employer’s ESIC, PF contribution towards labour funds, bonus, leave, uniform etc and amount should be inclusive service tax and back calculation would be made:
·         Ideal security v. CCE (2011) 33 STT 26 (CESTAT)
·         Premier security enterprises v. CCE (2009) 23 STT 418 (CESTAT)
·         Panther Detective services v. CCE (2007) 8 STT 215 (CESTAT)

1.4.     Reverse charge on security services provided by police:

Services provided by police to PSU or corporate or sports event held will be taxable as security service and tax will be actually payable on reverse charge by the recipient. (As per CBEC “taxation of service: An Education guide – 20.6.2012)

1.5.     Cenvat credit

CCE & C, Guntur v. Hindustan Coca-cola Beverages Pvt Ltd (2009) 15 STR 248 (Cestat, Bangalore) – credit of service tax on security agency services for preventing theft of goods held to be in relation to manufacture and Cenvat credit allowed on such security services.
CCE v. Ultra Tech cement Ltd (2009) 16 STR 611 (Cestat, Mumbai) – security arranged in off factory residential colony which has no nexus with business or manufacturing of excisable goods would not be entitled to avail credit of service tax paid on security services.

1.6.     Judgments

Sudharson security Bureau v. CCE (2008) STT 71 (Cestat, Chennai) – expenses like employee’s wages, ESI, PPF subscription etc. and other reimbursement expenses which were incurred by assessee in connection with rendering of security services to clients formed part of value of taxable service for payment of service tax

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