24 October 2013
Under reverse charge mechanism, receiver of security services is liable to pay 75% of ST. But in case of my company we have employed Security of Security Board of Maharashtra. whether i have to pay service tax on this service as service provided by local body?
1)Services provided by local authority would be considered as support services as per section 66D of the Finance Act. In such cases, liability to pay service tax would be on business entity receiving such services.
2)Business entities means:
business entity” means any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession.
3)So even non company service receiver would also be liable to pay service tax under reverse charge when security services received from government or local authority.
4)However, the status of service provider as local authority should be examined as per definition of local authority given in the Finance Act.
5)In these cases, liability to pay service tax would be on business entity on full consideration paid or payable to local authority (not on 75%).
24 October 2013
SECURITY SERVICES PROVIDED BY CHARTABLE TUST REGISTERED UNDER TRUST 12AA:-
1)Services provided by entity registered under section 12AA of IT Act by way of charitable activities is exempted under mega exemption notification.
2)Advancement of any object of general public utility upto a certain value is covered by the definition of charitable activities.
3)General public” means the body of people at large sufficiently defined by some common quality of public or impersonal nature. Services provided to company cannot be construed as advancement of any other object of general public utility. Hence, it would be liable to service tax under reverse charge.
24 October 2013
thank you sir... but as per my comany's IDT department Maharashtra Security board which is formed under maharashtra security guard regulation of of employment & welfare ACT 1981, is not local authority.
local authority has defined under 65B (31)as Section 65B (31) "local authority" means- (a) aPanchayat as referred to in clause (d) of article 243 of the Constitution; (b) a Municipality as referred to in clause (e) of article 243P of the Constitution; (c) a Municipal Committee and a District Board, legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund; (d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006; (e) a regional council or a district council constituted under the Sixth Schedule to the Constitution; (f) a development board constituted under article 371 of the Constitution; or (g) a regional council constituted under article 371A of the Constitution;
and accordingly security board is not local authority.
25 July 2025
Your company’s IDT department’s contention is **correct** based on the definition of “local authority” under Section 65B(31) of the Finance Act.
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### Explanation:
* The **Maharashtra Security Board** formed under the Maharashtra Security Guard Regulation and Welfare Act, 1981, **is not covered under the definition of “local authority”** as per Section 65B(31). * The legal definition of “local authority” includes Panchayats, Municipalities, Cantonment Boards, certain councils, and development boards as specifically listed. * Since the Security Board does **not fall under any of these categories**, it **is not treated as a local authority** for service tax purposes.
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### Impact on Service Tax Reverse Charge Liability:
* Since the security service provider is **not a local authority**, the **reverse charge provisions applicable to security services will apply as usual**. * You will be liable to pay service tax on **75% of the value of the security services received** under the reverse charge mechanism (unless the provider is registered and charging service tax on the invoice, but usually for security services reverse charge applies). * The **full payment (100%) liability on the service receiver applies only when the provider is a local authority**.
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### Summary:
| Situation | Liability on Service Receiver | | ------------------------------------------------------------- | ------------------------------------------------------ | | Security services from Local Authority | 100% service tax liability on receiver | | Security services from other providers (e.g., Security Board) | 75% service tax liability on receiver (reverse charge) |
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If you want, I can help you draft a note/response for your IDT department confirming this position. Would you like that?
CAclubindia
