Key Takeaways
- Security services (guard duty, patrolling, armoured car services) attract GST at 18% under SAC 998525.
- Under the Reverse Charge Mechanism (RCM), when a registered body corporate receives security services from any person other than a body corporate, the recipient pays the GST, not the supplier.
- The RCM entry was inserted into Notification No. 13/2017-Central Tax (Rate) with effect from 1 January 2019 under Section 9(3) of the CGST Act.
- Carve-outs: RCM does not apply when the supplier is itself a body corporate, when the recipient is registered only for TDS under Section 51, or when the recipient is a composition taxpayer.
- A registered body corporate paying RCM can claim Input Tax Credit of that tax (security services are not blocked under Section 17(5)), and TDS under Section 194C applies on the value excluding GST when GST is shown separately.
Security services are one of the few supplies where GST law deliberately moves the tax-collection responsibility from the supplier to the buyer. The reason is structural: the sector is dominated by small proprietorship and partnership agencies, while their clients are mostly large registered companies. To improve tax collection and reduce leakage, the government placed the liability on the recipient who is easier to track and audit. This is the Reverse Charge Mechanism (RCM), and it changes how both the agency and its corporate clients invoice, pay, and claim credit.
This guide explains the exact GST rate and SAC code for security services, the precise conditions that trigger RCM, who is carved out, the registration consequences for an agency, how a body corporate accounts for the tax in GSTR-3B, the Input Tax Credit position, and the frequent confusion with income-tax TDS under Section 194C. The rules below reflect the GST slab structure as it stands in 2026 (the 28% slab was abolished and the current slabs are 0, 5, 18, and 40 percent with effect from 22 September 2025; security services remain at 18%).
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GST Rate on Security Services: 18% under SAC 998525
Security services are classified under SAC (Services Accounting Code) 998525, described as "Investigation and security services" covering the supply of security personnel. In practice this includes:
- Guard and watchman services at offices, factories, residential complexes, and commercial buildings
- Patrolling and mobile security services
- Armoured car (cash-in-transit) services
- Bouncer and event security deployment
- Personal security officer (PSO) deployment
| Item | Detail |
|---|---|
| Nature of supply | Supply of security personnel / security services |
| SAC code | 998525 |
| GST rate | 18% (9% CGST + 9% SGST, or 18% IGST) |
| Slab status (2026) | 18% slab retained after the September 2025 rate restructuring |
The 18% rate applies regardless of whether the tax is charged under forward charge (by the agency) or under reverse charge (by the recipient). RCM changes who pays, not how much.
Reverse Charge Mechanism on Security Services
The legal basis for RCM on security services is Section 9(3) of the CGST Act, 2017, which empowers the government to notify categories of supply on which the recipient, not the supplier, is liable to pay GST. The specific entry for security services was inserted into Notification No. 13/2017-Central Tax (Rate) (the master RCM notification) by an amending notification, and it took effect from 1 January 2019.
The entry reads, in substance: where security services (supply of security personnel) are provided by any person other than a body corporate to a registered person (a body corporate located in the taxable territory), the recipient is liable to pay GST under reverse charge.
So the structure is:
- Supplier: any person other than a body corporate (typically a proprietorship or partnership agency)
- Recipient: a registered body corporate
- Who pays GST: the recipient, under RCM
The reason the rule is built this way is enforcement economics. Most security agencies are small, unregistered, or thinly capitalised, which historically made forward-charge collection unreliable. By shifting the liability to the registered corporate client (which has audited books, a GSTIN, and ITC incentives to report correctly), the government secures the tax at a single, traceable point.
Who Triggers RCM, Precisely
RCM on security services is conditional on both the supplier and the recipient profile. Get either side wrong and the wrong party pays.
The recipient must be a registered body corporate
"Body corporate" takes the meaning from the Companies Act, 2013 (Section 2(11)). It broadly covers companies (private and public) and bodies incorporated under law, but it does not include a sole proprietorship, a partnership firm, or a Hindu Undivided Family. The recipient must also be registered under GST.
The supplier must NOT be a body corporate
If the security agency is a proprietorship or partnership (not a body corporate), RCM is triggered when it supplies to a registered body corporate. This is the most common real-world case.
The three carve-outs (when RCM does NOT apply)
| # | Situation | Treatment |
|---|---|---|
| 1 | Supplier is itself a body corporate (e.g. a security company registered as a Pvt Ltd) | RCM does not apply. The supplier charges GST under forward charge. |
| 2 | Recipient is registered only for TDS under Section 51 (e.g. a government department registered solely to deduct GST-TDS) | RCM does not apply to that recipient. |
| 3 | Recipient is a composition taxpayer | RCM does not apply. A composition dealer cannot take ITC and the rule excludes it from this RCM entry. |
The logic of carve-out 1 is that a corporate supplier is already easy to track, so there is no enforcement gain in shifting the liability. Carve-outs 2 and 3 protect recipients who either are not "normal" registered persons (TDS-only) or cannot use the credit (composition), where loading an RCM cash liability would serve no purpose.
To learn how reverse charge operates across other notified supplies, see our detailed explainer on the Reverse Charge Mechanism (RCM) under GST.
Practical Impact: Does a Security Agency Need GST Registration?
This is where RCM produces a counter-intuitive but valuable outcome for small agencies.
When a non-body-corporate agency supplies only to registered body corporates, the liability to pay GST sits entirely with the recipients. The agency raises invoices without charging GST and notes that tax is payable by the recipient under RCM. Because the agency is not collecting GST on these supplies, it may not be required to register until its aggregate turnover crosses the registration threshold:
| Threshold | Applies to |
|---|---|
| Rs 20 lakh | Most states (services) |
| Rs 10 lakh | Special category states (certain north-eastern and hill states) |
This is a genuine compliance relief: a small proprietorship guard agency whose entire client book is corporate can often defer registration and avoid monthly return filing, because the tax is being discharged by its clients under RCM.
The position changes the moment the agency takes on any client that is not a body corporate (for example, an individual landlord, a proprietorship shop, or a partnership firm). For those supplies, RCM does not apply, forward charge kicks in, and the agency must register and charge 18% GST once it is liable. Many agencies therefore run a mixed model and must track which invoices are forward-charge and which are RCM.
Input Tax Credit on RCM Security Services
A registered body corporate that pays GST under RCM on security services can claim Input Tax Credit of that tax, provided the service is used in the course or furtherance of business.
Security services are not on the blocked-credit list under Section 17(5) of the CGST Act. Section 17(5) blocks credit on items such as motor vehicles (with conditions), certain employee benefits, works contract for immovable property, and goods/services for personal consumption, but security or guarding of business premises is a legitimate business input.
The mechanism is:
- The recipient pays the RCM liability in cash (RCM liability cannot be set off using existing ITC).
- Once paid and reflected, the recipient claims ITC of the same amount in the same or a subsequent period, subject to the normal conditions of Section 16.
The net cash impact is usually neutral over time (pay in cash, claim as credit), but the timing matters: cash goes out first, credit comes in after, so working capital is briefly affected.
How to Account for RCM in GSTR-3B and GSTR-2B
For the recipient body corporate, the RCM entries flow through specific return fields.
GSTR-3B
| Step | Field | What goes in |
|---|---|---|
| Declare RCM liability | Table 3.1(d) "Inward supplies (liable to reverse charge)" | Taxable value and tax on security services received under RCM |
| Pay the tax | Electronic cash ledger | RCM liability must be paid in cash, not via ITC |
| Claim the credit | Table 4(A)(3) "Inward supplies liable to reverse charge" | ITC of the RCM tax, if eligible |
So the same RCM tax appears twice in GSTR-3B: once as an output liability in Table 3.1(d) (paid in cash) and once as eligible ITC in Table 4(A)(3).
GSTR-2B
RCM inward supplies are auto-reflected in the recipient's GSTR-2B where the supplier has reported them. However, the recipient's liability to pay RCM does not depend on the supplier reporting it. The recipient must self-assess and pay RCM even where the supplier (often unregistered) reports nothing. Treat GSTR-2B as a reconciliation aid, not as the trigger for RCM liability.
TDS Under Section 194C on Payments to Security Agencies
Separate from GST, income-tax TDS applies to payments made to a security agency. Engaging a security agency is a contract for the supply of labour / services, which falls under Section 194C of the Income-tax Act, 1961 (payments to contractors).
| Payee | TDS rate under Section 194C |
|---|---|
| Individual or HUF contractor | 1% |
| Any other person (firm, company, etc.) | 2% |
TDS under Section 194C applies once the single-payment or annual aggregate thresholds are crossed. Security guarding is a contractor service, not a professional or technical service, so Section 194J does not apply here. If you are unsure which TDS section governs a particular vendor payment, our guide on which TDS section applies: 194C vs 194J vs 194Q vs 194H walks through the decision.
TDS is on the value excluding GST
The CBDT has clarified (Circular No. 23/2017) that where GST on services is shown separately in the invoice, TDS under Chapter XVII-B is deducted on the amount excluding the GST component. So if a security agency bills Rs 1,00,000 plus Rs 18,000 GST, income-tax TDS is computed on Rs 1,00,000, not Rs 1,18,000.
Common Confusion: TDS on the GST-Inclusive Gross
A frequent and costly error is deducting income-tax TDS on the GST-inclusive total.
Using the example above (Rs 1,00,000 service value + Rs 18,000 GST = Rs 1,18,000 gross):
| Method | TDS at 2% | Correct? |
|---|---|---|
| On Rs 1,18,000 (gross) | Rs 2,360 | Incorrect (over-deduction) |
| On Rs 1,00,000 (value excl. GST) | Rs 2,000 | Correct |
The correct deduction is Rs 2,000. Deducting on the gross over-deducts Rs 360 and short-pays the vendor, who then has to reconcile a mismatch in Form 26AS / AIS. To handle this correctly:
- Insist that the agency's invoice shows the GST component separately. The exclusion only applies when GST is separately disclosed.
- Deduct 194C TDS on the pre-GST value only.
- Remember the two tax systems are independent: GST/RCM is one computation, income-tax TDS is another. Where the agency is a non-body-corporate billing a corporate client, the client may simultaneously (a) pay GST under RCM and (b) deduct 194C TDS on the value excluding GST. Both can apply to the same payment without conflict.
Getting these two right in one shot keeps the vendor's ledger clean and reduces exposure to penalties and interest on short or excess deduction.
Frequently Asked Questions
What is the GST rate and SAC code for security services?
Security services (guard duty, patrolling, armoured car services, and supply of security personnel) attract GST at 18% under SAC 998525. The 18% rate applies whether the tax is charged under forward charge by the agency or under reverse charge by the recipient.
When does RCM apply on security services?
RCM applies under Section 9(3) of the CGST Act read with Notification No. 13/2017-Central Tax (Rate) (entry effective 1 January 2019) when a registered body corporate receives security services from any person other than a body corporate. In that case the recipient pays the 18% GST, not the supplier.
Is a proprietorship security agency a 'body corporate' for RCM?
No. A sole proprietorship and a partnership firm are not body corporates under the Companies Act, 2013. When such an agency supplies to a registered body corporate, RCM is triggered and the recipient pays the GST. If the agency were a company (a body corporate), RCM would not apply and the agency would charge GST under forward charge.
When does RCM on security services NOT apply?
RCM does not apply in three situations: (1) the supplier is itself a body corporate, (2) the recipient is registered only for TDS under Section 51, or (3) the recipient is a composition taxpayer. In each case the normal forward charge applies and the supplier charges GST.
Does a security agency need GST registration if all its clients are companies?
Often not, until aggregate turnover crosses the threshold (Rs 20 lakh, or Rs 10 lakh in special category states), because when all clients are registered body corporates the GST liability shifts to them under RCM. The agency invoices without charging GST. But the moment it serves any non-body-corporate client, forward charge applies on those supplies and registration may become necessary.
Can a company claim ITC on RCM paid for security services?
Yes. A registered body corporate that pays GST under RCM on security services can claim Input Tax Credit of that tax, because security services are not blocked under Section 17(5) and are used in the course of business. The RCM liability must first be paid in cash, after which the credit can be claimed.
Where is RCM on security services reported in GSTR-3B?
The recipient reports the inward supply and tax in Table 3.1(d) (inward supplies liable to reverse charge) and pays it through the electronic cash ledger. The eligible ITC of the same amount is then claimed in Table 4(A)(3). The RCM liability stands even if the supplier has not reported the supply in GSTR-2B.
Should TDS under Section 194C be deducted on the GST-inclusive amount?
No. Per CBDT Circular No. 23/2017, where GST is shown separately on the invoice, income-tax TDS under Section 194C (1% for individual/HUF, 2% for others) is deducted on the value excluding GST. Deducting on the GST-inclusive gross over-deducts and creates a Form 26AS / AIS mismatch for the vendor.
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Sources and verification: This guide is based on Section 9(3) of the CGST Act, 2017 (reverse charge on notified supplies), Notification No. 13/2017-Central Tax (Rate) dated 28 June 2017 as amended (the security-services RCM entry inserted with effect from 1 January 2019), and the GST tariff classification of security services under SAC 998525 at 18%. The "body corporate" definition is taken from Section 2(11) of the Companies Act, 2013. Input Tax Credit eligibility is verified against Sections 16 and 17(5) of the CGST Act, 2017. GSTR-3B reporting fields (Table 3.1(d) and Table 4(A)(3)) follow the CGST Rules and GST portal return formats. Income-tax TDS treatment is based on Section 194C of the Income-tax Act, 1961, and CBDT Circular No. 23/2017 (TDS on amount excluding GST when GST is separately indicated). Registration thresholds (Rs 20 lakh / Rs 10 lakh special category) are per Section 22 of the CGST Act. GST slab structure reflects the position after the 22 September 2025 rate restructuring (0/5/18/40%). All provisions should be verified against www.gst.gov.in and www.incometax.gov.in before applying to specific compliance decisions.