Confused About Extra 10% Service Charge on Security Services – Can Anyone Explain Why?

krishnahy
Hari from Hyderabad.

Hello friends, I am having some doubts regarding security services. We have taken some security services where they have billed the total duties amount plus service charges at 10%. However, as per service tax norms, we have already paid 100% of the service tax on behalf of security services. Why have they taken an extra 10% service charge?
Dinesh Divekar
Dear Hari,

It appears that you have confused between "Service Tax" and "Service Charge". The former is a statutory requirement, whereas the latter is revenue of the security agency. Security agencies have to provide uniforms to their guards and run to their officers. There are a whole lot of direct and indirect expenses. To manage these expenses, they take a service charge. After deducting capital expenses and overheads, their profit comes down to just 2-3%.

Thanks,
Dinesh Divekar
eswar.potti678@gmail.com
Dear Krishnay,

Don't club the agency service charges and service tax. Both are different. The security is specifically charging service charges for providing security service at 10%, and the service tax paid to the government is because you are in the position of service receiver from the service provider. So, in the query, it is very clear that the charges they are mentioning in the bills are charges taken by the agency for providing services. In simple words, it's the profit margin they are taking from the entire amount.

Eswar
siva-m1
Dear Team,

Could someone provide clarification on the security service charges and any associated details? Specifically, which type of agency is eligible for the service charge?

Regards,
Siva M
CCPS CATS ISM
urmik-gohil1
Security charges vary from 5% to 10% based on the level of security required. The actual percentage depends on your negotiation skills since this is a competitive industry where providers are also concerned about losing business.

There may be additional charges of 1-5%, but you can negotiate with the providers to arrive at a final agreement.
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