The private security industry is a crucial component of security and safety which is responsible for protecting not only critical infrastructure systems but also intellectual property and sensitive corporate information. Business establishments rely heavily on private security for a wide range of functions including protecting employees and property, site security, cash logistics operations, conducting investigations, providing information technology security, and many other functions.
FICCI has recently organized the sixth edition of Private Security Industry Conclave (PSIC) 2018 with an objective to bring together experts from the government, industry, controlling authorities, user agencies and other stakeholders to discuss and debate various policy and regulatory issues concerning the private security industry. The theme of the event was ‘Job Creation and Skill Development in the Private Security Sector.’
The PSIC 2018 was inaugurated by Shiv Pratap Shukla, Minister of State for Finance, GoI, who also released a FICCI-BDO report on ‘Private Security Industry: Job Creation and Skill Development,’ which dwells upon the skill development and jobs creation, policy issues, GST implication and its impact, shift from the unorganised to organised sector, and the need of integration of manpower and technology.
Cmdr. Gautam Nanda (Retd.), Associate Partner, BDO India, the knowledge partner for the conclave, gave an overview of the industry, underlining the vital roles of PSI in skill development and job creation. He said that the industry was the largest employer with 8.9 million personnel with a potential to employ 3.1 million more by 2022. The estimated market size of the industry was Rs.57,000 crore and was expected to rise to Rs.1.5 lakh crore by 2022.
Goods & Services Tax Issue
Amongst various others, the issue of Goods and Services Tax (GST) imposition on the private security industry was strongly raised on the forum. The FICCI Committee on Private Security Industry sought relief in GST for PSI and put forth three options to resolve the issue.
- Impose GST only on the service charge, not on total invoice value (18% GST on 10% of invoice value): Private security sector operates on a cost plus pricing model. Bases for the calculation of per head cost are the applicable minimum wage, and statutory obligations like PF, ESIC, leave, bonus, gratuity etc. The agencies charge 10% or less as their service charge on above mentioned cost structure. Therefore, charging GST on invoice value results in taxing statutory payments. With the payment cycle of 90-180 days, this leads to significant cash flow pressure and even risk of default on statutory compliances.
Charging GST on 10% of invoice value would not only enhance compliance but also ease pressure on thousands of MSME entities in private security sector
- Shift obligation to discharge GST to the recipient of service: Shifting of GST compliance obligation from PSAs to the service users would significantly ease cash flow pressure and risk of default under high interest burden.
The change will also lead to timely GST compliance and eliminate possibility of leakage of revenue for the government.
- Reduce GST rate from 18% to 5%: Private security has emerged as an essential service to support the government machinery in homeland security activities. With reduction in the GST tax rate from 18% to 5%, pressure from customers on manpower reduction is likely to ease significantly resulting in job protection for private security guards. Lower GST rate is also likely to boost volume of work orders, thereby paving the way for demand expansion and resultant increase in skill development activities, as well as employment generation by private security sector.
The minister assured that the Finance Ministry is actively considering FICCI’s recommendations to reduce the GST rate to minimise its impact on the industry and capitalise on its job-creation potential. He said that the government acknowledges the contributions of the private security industry in creating jobs for the poor, ex-servicemen and those who have migrated from villages, and promised that he would do the best possible to reduce the tax. He invited a FICCI delegation to his office to discuss and take the matter further.
Rituraj Sinha, Chair of the FICCI Committee on Private Security Industry pointed out that based on the Committee’s discussions with the Finance Minister and the MoS for Finance, there is a conviction and genuine intent on the part of the government to give GST relief to the industry. Such relief would greatly benefit the small players who have to bear the burden of interest costs, as they have to borrow to deposit GST in advance.
The Co-Chair of FICCI Committee on PSI & Chairman, Peregrine Guarding, Maj. Manjit Rajain (Retd.) also expressed optimism towards the serious inclination on the part of the government to give GST relief to PSI.
Skill Development & RPL issue
At the forum of PSIC 2018, seventeen MoUs were signed between the Management and Entrepreneurship & Professional Skills Council (MEPSC) and private security companies to impart training to over 3.17 lakhs security guards under the government’s ‘Recognition of Prior Learning’ (RPL) scheme.
Addressing the gathering of security professionals Dharmendra Pradhan, Minister of Skill Development and Entrepreneurship, GoI, said that skilling of manpower is critical for private security industry which is growing at an annual rate of 20-25 per cent. The industry must partner with the government in skilling, reskilling and upskilling of the workforce in order to meet the challenges of new RPL 4.0.
He further said that there is a need to make the economy more formal. In other developed countries, skilling, reskilling and upskilling are the jobs of the industry, and the respective governments undergo partnership with the private sector for this purpose. Government of India has shown conviction in the industry and hence has changed the policy to RPL 4.0. There is a need to increase the employable workforce in the country and bring them under the skilling ecosystem.
On the occasion, the Minister also felicitated controlling authority of NCT of Delhi, Uttar Pradesh and Haryana for the best practices in the proper enforcement and implementation of PSARA under various categories. Himachal Pradesh was given the special jury award.
“There’s a long list of issues that we want government to look into, and skilling is one of them. Apart from construction and logistics, the private security industry is among the top five sectors to create jobs in the country,” said Rituraj Sinha, “The sector has about 53 million security personnel registered with the government’s provident fund scheme.
Ms. Manjari Jaruhar, Honorary Advisor, FICCI Committee on Private Security; and Rajeev Sharma, Member, FICCI, Private Security Committee and Country Managing Director, G4S India also shared their perspective on the private security sector.
SecurityLink India had an opportunity to interact one-to-one with Rituraj Sinha on the forum. Here are the excerpts: