The government has brought the Central Industrial Security Force (CISF), which protects country’s vital installations like nuclear plants and airports, under the ambit of service tax.
Finance Ministry sources said CISF will have to pay service tax as it comes under the category of “security agency services” of the Finance Act of 1994 under which only private security agencies are currently paying the tax.
According to the official notification, CISF will have to pay the service tax of about 10 per cent from their income to the government exchequer.
The force guards about 240 installations, including major airports, nuclear plants, Indian Space Research Organisation, Delhi Metro and ONGC, among others, in return for payment on a cost realisation model.
The Union home ministry has recently asked the force to pay service tax from current fiscal, thus bringing an end to series of discussions over the last few years between the home ministry and finance ministry as to whether an armed wing of the government should be considered as a service provider.
As per the Act, security agency means “any person engaged in the business of rendering services relating to the security of any property, whether movable or immovable, or of any person... Including the services of providing security personnel”.
The then finance minister, P Chidambaram, had contended that since the force was providing security to installations on chargeable basis, it should pay the service tax.
However, CISF had opposed the move, saying it was an arm of the government and hence should not be considered as a service provider because it comes under the direct control of the home ministry just like other paramilitary forces.
Sources said the logic used was that CISF does not have to pay anything out of its own pocket but just has to transfer the service tax burden to its clients.
But the central force had said they were not doing any service and were carrying out their duty on the direction of the government and hence could not be compared to other private security agencies, sources said.
They said the finance ministry had sought service tax from the force with effect from May 1, 2006, a decision which is still pending.
The Service Tax Authority also has issued a number of notices to CISF asking them to pay the service tax.
The CISF Act, which was recently amended to allow it to provide security to private establishments, provide security to government installations under a cost realisation scheme wherein the firms which it has been asked to provide security by the government, bears all the cost including salary, weapons and accommodation of personnel posted there.
