The Central Association of Private Security Industry (CAPSI) has written to the Prime Minister protesting against the application of the Reverse Charge Mechanism (RCM)
India’s private security industry is calling on Prime Minister Narendra Modi to overhaul what it calls an “arbitrary” Goods and Services Tax (GST) rule, warning that the current system is crippling the sector and threatening the financial viability of its firms.
The Central Association of Private Security Industry (CAPSI) has written to the Prime Minister protesting against the application of the Reverse Charge Mechanism (RCM), which forces many companies to pay tax on services they provide, rather than the clients they provide them to.
Under the RCM, the tax is paid directly to the government by the recipient of the service. However, a GST notification issued in 2018 excluded “body corporates” from this benefit, granting it only to proprietary and partnership firms. CAPSI chairman Kunwar Vikram Singh said this has created a “glaring disparity” and a two-tiered system where companies performing the same work are treated unequally under tax law.
In a letter to Modi, CAPSI stated that the policy has “crippled the operational and financial sustainability of our services.”3 The association argues that the denial of RCM to body corporates forces them to bear the full GST liability upfront, severely impacting cash flow.4 With many firms operating on tight profit margins and facing payment delays of up to 90 days from clients, this tax burden leaves them with no option but to pay GST before they have even been paid for their services.
CAPSI, which represents a sector with over 8.5 million employees, has been fighting this battle since 2014.According to Singh, the GST Council had initially decided to apply the RCM to all security services in 2018, but the subsequent notification failed to reflect that decision.7 The association argues that this deviation from the council’s intent has not only led to confusion and compliance burdens but has also distorted competition.