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Compositon scheme for service provider

yash (accountant) (519 Points)

31 May 2020

I am providing security service and my t/o is less then 50 lakhs.

Can i opt for composition scheme. and what is the tax rate?

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VAISHNAVI R (Articled Assistant) (16 Points)
Replied 31 May 2020

Yes. before 30 June. rate 6%

Shivam RC (Student) (23683 Points)
Replied 31 May 2020

Sir before answering your question, I have one question to you.

"What is your Business Constitution ( Company or HUF or Partnership or Proprietorship Firm ) ???"

yash (accountant) (519 Points)
Replied 31 May 2020

Company
and also tell what if constitution is different

Shivam RC (Student) (23683 Points)
Replied 31 May 2020

As per Notification No. 29/2018-Central Tax (Rate), dated 31.12.2018 ( effective from 01.01.2019 ), any Registered Person receiving Security Services from any person other than a Body Corporate ( like Company ) is required to pay GST on Reverse Charge Mechanism ( RCM ) basis.

Therefore Security Services are now a notified services for RCM under Section 9(3) of the CGST Act 2017.

Since your constitution is COMPANY, you are required to pay GST on FORWARD CHARGE MECHANISM ( FCM ) basis only. You need to raise Tax invoice and collect GST accordingly.

Incase of other Business Constitution ( like HUF, Partnership or Proprietorship Firm ), GST on Supply of Security Personnel is required to be paid via Reverse Charge Mechanism ( RCM ) basis by the Recipient of Services.

Now the question arises regarding what type of Registration do you want ?

(a). REGULAR Registration or
(b). COMPOSITION SCHEME Registration.

Since you are willing to opt for Composition Scheme Registration ( under Section 10 of the CGST Act 2017 ), you can go ahead with it. No problem. Previously Composition Scheme was not allowed to Service Providers but the Government vide Notification No. 2/2019 - Central Tax ( Rate ), dated 07.03.2019, has notified Composition Scheme for Service Providers w.e.f 01/04/2019 subject to certain conditions.

Therefore, you can opt for Composition Scheme since your Aggregate Turnover is within the prescribed turnover limit ( i.e. Rs. 50 lakhs ). You are required to pay GST @ 6% ( CGST @ 3% + SGST @ 3% ) out of your own pocket and will not be eligible to claim ITC.

Hope you understood Sir...

Regards,
Shivam RC.

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