RK Sinha leads, Industry delegation on GST to the government

An industry delegation led by Sh. RK Sinha, Member of Parliament, Rajya Sabha and Sh. GB Singh, Vice Chairman, International Institute of Security & Safety Management (IISSM) and other industry leaders met Sh. Santosh Gangwar, Union Minister of State for Finance (Revenue) on 4th May, 2017 to apprise him of the anomalies related to categorising and taxing Goods and Services pertaining to the Security & Fire Industry

The plea referred to the Government’s decision to club the 28% GST Slab to CCTV, Fire & Burglar Alarms,  Access Control Systems and Fire Extinguishers etc. which are life safety equipments on the same level as Luxury and Sin Goods (like tobacco and cigarettes) and 18% applicable on Guarding and Cash Transportation Services .

The industry’s pertinent question is  whether it is justified that the two should be viewed at par?  The industry sought to explain that threats to India’s internal security are increasing due to various internal and external factors. Happenings such as 26/11 Mumbai terror attacks, Kashmir insurgency, cross border terrorism, increasing Maoist activity, cybercrimes, cultural conflicts and other real and alleged threats have reiterated the importance of protecting the Indian citizens from the potential maelstrom.

To encourage establishments and people of India to safeguard themselves from fire and security threats, citizens of our country and businesses need to be inspired to invest in acquiring systems such as fire and burglar alarms and CCTV systems etc. Apart from protecting the individuals and businesses, these systems also help the law enforcement agencies in solving crimes. Amongst many others, the Nirbhaya case was solved because of a private CCTV camera that caught the images of the crime.

In the GST Rate Schedule For Goods published after the GST Council Meeting held on 18th May, 2017 CCTV Cameras, Recorders, Fire & Burglar Alarms, Fire Extinguishers etc (as per list enclosed) have been treated as De-merit, Luxury and Sin goods and placed in the high slab of 28%.
The delegation explained to the minister that the public needs to be incentivised, as has been done in many western countries, and not penalised for investing in these essential life safety items. In fact, in Australia a GST of 10% is charged on fire & security systems and there is no/nominal import duties/tax. In Malaysia the GST is just 6%.

The delegation impressed on the minister that these goods may be moved from the De-Merit List to list of Essential Items and either not charged any GST or a maximum of 5%, as is being done by 5 States. Similarly, services related to their installation and service should also not be taxed or taxed nominally, so that maintenance of CCTV, fire and other systems can be done economically.

As most of these systems are not currently made in India, they have to be imported. Since the tax concessions that the handful of manufacturers enjoy at present are also proposed to be withdrawn, thereby discouraging local manufacturing, a lower GST rate will also help such manufacturers.

The security industry employs large number of people as security guards (employees), who mainly belong to families presently below poverty level and which are significant in number i e. exceeding 50 lacs, thereby providing means of livelihood to them.
Recently there has been significant increase in central wage (by 56%  approx.) due to which the manpower costs have already increased and with the increase in the GST rate to 18%, it will further make the business establishments to cut down their work orders to avoid additional financial burden.

Since the guarding industry is manpower oriented and with almost 10,000 security agencies operating as SMEs and already working at a marginal 2%- 3% profit after tax, any further adverse impact on its already low profit margin would cripple the industry, rendering many jobless and give rise to security concerns for the society and business establishments.

The delegation lead by Mr RK Sinha and Mr GB Singh is hopeful that the points made will have the desired effect on the government and that it will see the anomalies connected to placing this crucial cog in the wheel of the country’s security in the same bracket as luxury goods!