Security Services to Food Corporation of India Is Taxable Under GST: WBAAR

The applicant, Food Corporation of India (FCI), is a public sector undertaking set up under the Food Corporations Act, 1964. It operates under the Department of Food and Public Distribution, Ministry of Consumer Affairs, Food and Public Distribution, Government of India. To protect its depots and offices, FCI receives various input services, such as security services.

As per the applicant, after the GST system was established, such security services were discharged by FCI under the reverse charge mechanism (RCM) at 18% on the gross amount of security bills.

The applicant sought an advance ruling by filing an application under subsection (1) of section 97 of the GST Act before the West Bengal Authority for Advance Ruling (AAR) for the following question:

“Whether the security services provided by the Security Agencies to Food Corporation of India, West Bengal Region, qualify as “pure services” provided to a Government Entity in relation to functions entrusted under Article 243G/243W of the Constitution of India, and are therefore exempt from GST under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (as amended)?”

WBAAR ruled that the security services offered by the security agencies to FCI, West Bengal region, are ‘pure services,’ and the same are taxable under GST.

The authority clarified that the exemption is available only when the services are provided to the Central Government, State Government, Union territory or local authority. However, the government entity is not eligible for the exemption.

As per WBAAR, the exemption provided in serial no. 3 in the table of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 is not applicable for the security services provided by the security agencies to FCI, as it is a government entity.