How high GST rates are squeezing India’s security service providers
Human workforce as a service means providing businesses with skilled workers to handle specific tasks. In the security industry, this involves supplying trained security guards, supervisors, and other personnel to protect individuals and property. This allows companies to focus on their core operations while relying on specialised service providers to manage their workforce needs. Companies like HiTech Human Capital (India) Ltd (HHCiL) use this model to fill important roles in different sectors, ensuring smooth and safe operations. Challenges of GST in the security services industry In India, the security services industry plays a crucial role in safeguarding businesses, institutions, and individuals. Under Neeraj Tiwari’s leadership, HHCiL has been at the forefront of this industry, providing essential services such as security solutions, facility management, and payroll management. However, the introduction of the Goods and Services Tax (GST) has brought about significant challenges for the sector. When GST was introduced in July 2017, it marked a transformative shift in India’s taxation system. The Indian government introduced this tax system to streamline tax collection, eliminate the cascading effect of multiple taxes, and bring more businesses into the formal tax net. However, this change has introduced complexities and financial burdens for the security services industry, particularly under the Forward Charge Mechanism (FCM). Understanding RCM and FCM in GST Initially, security services were taxed under the Forward Charge Mechanism (FCM), meaning service providers like HHCiL were responsible for collecting and remitting GST to the government. This created a significant burden on companies that have thin margins and are responsible for paying high GST rates. Due to difficulties in tax collection from numerous small service providers, the government introduced the Reverse Charge Mechanism (RCM) in January 2019 for any person other than body corporate. To improve the situation, industry leaders are now advocating for the adoption of the RCM for all corporate bodies. Under RCM, the liability to pay GST would shift from the service provider to the service recipient. This change would reduce the financial pressure on security service companies and streamline the tax payment process. More importantly, this shift would help in preserving jobs for lakhs of security guards across the country. The strain of high GST rates Like many other companies in this sector, HHCiL charges service fees ranging from 3.85% to 10% for its services. However, the GST imposed on these services is a hefty 18%. This discrepancy creates a significant financial burden for companies, particularly smaller players in the market. “The government, as a silent partner, earns 18% from our business while our service fees range between 3.85% to 10%,” Neeraj Tiwari pointed out. This stark difference between what a company earns and what it pays in taxes poses a severe threat to the sustainability of businesses in the security services sector. The high GST rate also puts companies in a difficult position, as it forces them to either absorb the extra costs, which reduces their already small profits or pass these costs on to their clients. If the business decides to pass on these costs, it could potentially reduce demand for their services. Advocating for a reduction in GST or RCM implementation Facing the mounting challenges posed by the 18% GST under FCM, industry leaders are now increasingly advocating for a reduction in the tax rate or adopting the Reverse Charge Mechanism (RCM). The shift to RCM would ease the financial strain on companies like HHCiL, allowing them to maintain their slim margins and continue offering competitive pricing to clients. By shifting the GST payment responsibility to the service recipient, companies in the security services sector will also be able to improve their cash flow, making it easier to sustain operations and grow. “If the GST department does not reconsider the applicability of RCM, our industry could face a drastic collapse, leading to the closure of hundreds of private security agencies and the loss of jobs for lakhs of security guards,” Neeraj added.
Ease of Compliance to maintain registers under various Labour Laws (Gujarat) Rules, 2017
he notification No. KHR-2017-LBL-191-2016-26789-M.3 dated 27/12/2017, Labour and Employment department, Gandhinagar, many of the registers and forms, which needs to maintain for compliance with Labour Laws, have been modified by the Ministry of Labour under the contract labour (R & A) act, 1970 to easier the compliance as below: Existing Form Under The Contract Labour (R & A) Act, 1970 New Form under Ease of Compliance to maintain registers under various Labour Laws (Gujarat) Rules, 2017 Form XIII (Register of Workmen) Form A Form XVI (Muster Roll) Form D Form XVII (Register of Wages) Form XXIII (Register of Overtime) Form B Form XX (Register of Deduction for damage or loss) Form XVI (Register of Fines) Form C Form XXII (Register of Advances) You can maintain these registers in soft copy format without altering the integrity, serial number and contents of the columns.
EPFO launches Electronic Facility Principal Employer to view compliances of their employees engaged by or through Contractors
The principal employer is the one who employees’ labour/employees through a contractor. A new online facility will be available on the website of EPFO for the Principal Employers (PE) to upload work orders/ outsourced job contracts/ contract workers-related information. This is done to help with EPF compliance of their contractors and enhance the coverage to extend provident fund benefits to eligible employees. “EPFO registered employer engaging employees through contractor(s) can add the details of contractor(s) & contract employees at EPFO’s Unified Portal.” PEs that are not registered with EPFO can register on the Unified Portal to receive login/password to add details of their contractor(s) and contract employees. Once an employer adds the contractor(s) details, employee-wise remittances made by the contractor(s) through the electronic challan-cum-return (ECR), can be viewed. PE can now ensure that their contractor(s) enroll all contract workers and remit EPF contributions through ECR through this facility.
The Contract Labour (Regulation and Abolition) Act, 1970- Circular for difficulty faced by Contractors on Renewal of Contract Labour License
Circular for difficulty faced by Contractor at the time of renewal of Contract Labour License (Gujarat State) with the previous circular dated 31/12/2020. As per the previous circular, the Security deposit amount increased by Rs. 540/- from the existing amount of Rs. 270/-. But now the portal not allowing the renewal according to the previous circular dated 31/12/2020. Facing the issue with the employer, the department has issued a new circular on 29/01/2021 and the highlights are as given below
Changes Highlight in the Contract Labour Act, Gujarat State
Highlight in the Contract Labour Act, Gujarat State 1. Rule may be called “The Contract Labour R & A (Gujarat) (Amendment) Rules, 2020. 2. Security deposit fees increased Rs.540/- from existing fees of Rs.270/- per person. 3. Registration fees increased for Principal Employer as per amendment. 4. License fees increased for Contractor as per amendment and up to 5 years. 5. Validity of License: license shall remain in force for the period mentioned in Form V issued by Principal Employer. 6. New format introduced of Form V included validity period. 7. In said rule, rule 29, rule 30, and rule 32 shall be deleted.
Amendment in ESIC, Reduced Contribution & Increases Maternity Benefit to Members
Labour ministry has reduced rate of contribution by employees & employers to the Employees’ State Insurance Corporation scheme for new areas while increasing the maternity benefit entitlement to its insured members in the case of confinement from Rs 5,000 to Rs 7,500. Employees’ State Insurance Rule, 1950, rule 51B shall be omitted, it is said in a gazette notification. Rule 51 B of the ESIC Rules provides for employers’ contribution at the rate of 3% of the wages of the employee and employees’ contribution at 1% for initial two years in areas where the Act is implemented for the first time. However, consequent to the completion of twenty-four months from the date of implementation of the Act, the rate of contribution has to be restored to 4.75% by employer and 1.75% by the employee as per Section 51 of the Rule. The government has also notified enhanced reimbursement under the maternity benefits for ESIC subscribers. In the Employees’ State Insurance Rules, 1950, in the rule 56-A, for the words “rupees five thousand”, the words “rupees seven thousand five hundred” shall be substituted,”. As per the ESIC Rules, an insured woman and an insured person in respect of his wife is eligible for a sum of Rs 5000 per case as medical bonus on account of confinement expenses, provided that the confinement occurs at a place where necessary medical facilities under the Employees’ State Insurance Scheme are not available. Further, the confinement expenses shall be paid for two confinements only. This has now been revised to Rs 7,500 per case.
Changes in procedure to take Maternity Benefit in Employees State Insurance Corporation
No. N-12/13/1/2016-P&D:— Whereas draft Regulation further to amend the Employees’ State Insurance (General) Regulations, 1950 was published as required under sub-section (1) of Section 97 of the Employees’ State Insurance Act, 1948 (34 of 1948), in the Gazette of India (Extraordinary), Part-III –Section –4 vide Sr. No.52 dated the 24th January, 2020 for inviting objections and suggestions from all persons likely to be affected thereby till the expiry of the period of Thirty days from the date on which this notification was published, are made available to the public :— And whereas, the said Gazette Notification were made available to the public on 11.02.2020; And no objections or suggestions were received from any of the persons likely to be affected; Now, therefore, in exercise of the powers conferred by Section 97 of the Employees’ State Insurance Act, 1948 (34 of 1948), the Employees’ State Insurance Corporation, do hereby makes the following Regulations further to amend the Employees’ State Insurance (General) Regulations, 1950, namely :- 1. These Regulations may be called Employees’ State Insurance (General) (First) Amendment Regulations, 2020. 2. In the Employees’ State Insurance (General) Regulation, 1950, the following changes in Regulations and Regulation forms will be made. No. N-12/13/1/2016-P&D:— Whereas draft Regulation further to amend the Employees’ State Insurance (General) Regulations, 1950 was published as required under sub-section (1) of Section 97 of the Employees’ State Insurance Act, 1948 (34 of 1948), in the Gazette of India (Extraordinary), Part-III –Section –4 vide Sr. No.52 dated the 24th January, 2020 for inviting objections and suggestions from all persons likely to be affected thereby till the expiry of the period of Thirty days from the date on which this notification was published, are made available to the public :— And whereas, the said Gazette Notification were made available to the public on 11.02.2020; And no objections or suggestions were received from any of the persons likely to be affected; Now, therefore, in exercise of the powers conferred by Section 97 of the Employees’ State Insurance Act, 1948 (34 of 1948), the Employees’ State Insurance Corporation, do hereby makes the following Regulations further to amend the Employees’ State Insurance (General) Regulations, 1950, namely :- 1. These Regulations may be called Employees’ State Insurance (General) (First) Amendment Regulations, 2020. 2. In the Employees’ State Insurance (General) Regulation, 1950, the following changes in Regulations and Regulation forms will be made. (i) Insertion of Regulation 87A: Notice of Commissioning Mother An Insured Woman who wishes to have a child and get embryo implanted in any other women shall give such notice in Form 17 amended to the appropriate branch office by post or otherwise and shall submit together with Agreement of embryo implantation executed between commissioning mother with the other woman. (ii) Insertion of Regulation 88A: Declaration by Insured Women of her surviving child or children Insured Women claiming maternity benefit before confinement or after confinement or miscarriage shall submit the declaration of her surviving child or children. In case Insured woman giving birth to more than one child such claim shall be treated a single claim, however, for the next confinement the number of surviving children should be counted as per the actual number of surviving children at the time of claiming maternity benefit. (iii) Insertion of 89C: Claim for Maternity Benefit by Commissioning Mother Regulation 89C Every Commissioning mother who as biological mother wishes to have a child and prefers to get embryo implanted in any other woman, claiming maternity benefit shall submit to the appropriate office by post or otherwise a claim for maternity benefit in Form 19 (Amended) together with copy of agreement on non-judicial stamp paper between commissioning mother and the other woman to whom embryo implantation is intended, copy of certificate issued by Assisted Reproductive Technology Clinic and copy of birth certificate issued by the authority under the Registration of Births & Deaths Act, 1969.Provided further that if commissioning mother and the other woman both are Insured Women, the claim will be provided only to the commissioning mother. Claim against miscarriage will not be payable to the commissioning as well as to the other woman. (iv) Insertion of 89D: Claim for Maternity Benefit by Adoptive Mother Regulation 89D Every Insured woman, who legally Adopts a child of upto 3 months of age, claiming maternity benefit shall submit to the appropriate office by post or otherwise a claim for maternity benefit in (Form 19 Amended) together with copy of the court order/Certificate from Registrar and birth certificate issued by the Authority under the Registration of Births & Deaths Act, 1969 incorporating the name of adoptive parents or single Insured woman who legally adopts a child and copy of the Adoption Order issued by the Competent Court. In case of annulment of adoption approved by the court Insured Woman will refund maternity benefit received by her. (v) Regulation Revised Form no. 17 and Form no. 19 as notified vide No. N-11/13/2/2003 –P&D dated 01.10.2004 and published in the Gazette of India (Part-III Section-4) dated 23rd October, 2004, shall be substituted by revised forms as annexed to this notification of Draft Regulations. They shall come into force on publication of final notification in the Gazette of India.
Your take home salary to increase, Govt. reduced EPF contribution to 10% for May & June & July 2020
Finance Minister Nirmala Sitharaman had last week (May 13) announced that for the next three months employee provident fund (EPF) contribution will be 10 per cent each for employees and employers as compared to the statutory obligation of 12 per cent. The move is to increase take-home salary for employees and to give relief to employers in payment of provident fund. The government has decided to continue EPF support for business and workers for 3 more months providing a liquidity relief of Rs 2,500 crores, the FM said. Under this new provision, the employers will continue to pay 12 per cent, while employees will have the option to pay 10 per cent for the next three months. However, this does not apply to those companies where government is giving the entire 24 percent contribution towards EPF. Furthermore, in the case of the central public sector enterprises and state public sector, this exempt will not be applicable. They will continue to pay 12% as EPF contribution.
Now there will be NO penalty on employers for delay in Provident Fund contributions, said EPFO
Relief to establishments covered under EPF and MP Act, 1952 from levy of penalty for delayed deposit of dues during lockdown Due to prolonged lockdown announced by the Govt. to control the spread of COVID-19 and other disruptions due to pandemic, establishments covered under EPF & MP Act, 1952 are distressed and unable to function normally and pay the statutory contributions in time. Considering the difficulty faced by the establishments in timely deposit of contributions or administrative charges due for any period during lockdown, the EPFO has decided that such delays due to operational or economic reasons shall not be treated as default and penal damages should not be levied for such delay. Circular dated 15.05.2020 has been issued to Field Offices of EPFO containing instructions to the effect that no proceeding shall be initiated for levy of penal damages in such cases which is available under TAB “COVID-19” on home page of EPFO website. The aforesaid step shall ease the compliance norms for 6.5 lakhs EPF covered establishments and save them from liability on account of penal damages.
Ministry of Home Affairs issues new guidelines for Lock-down 4.0 today
The Center has extended the nationwide lock down until May 31, but allowed several more relaxations outside containment zones to restart economic activity. For the states, the big change is that they would be allowed to demarcate the red, green and orange zones. The new guidelines by Ministry of Home Affairs (MHA) permits barber shops, salons and shopping complexes to open. However, the night curfew will remain in effect, which means that all non-essential travel will remain prohibited between 7pm and 7am. The ban on flights and metro services will also remain in place till May 31.