Security Services Provided To FCI Are Not Exempt From GST: AAR

The West Bengal Authority for Advance Ruling (WBAAR) has held that security services provided to the Food Corporation of India (FCI) are not exempt from GST, ruling that the benefit under Notification No. 12/2017–Central Tax (Rate) is unavailable to FCI despite its status as a Government Entity. The bench of Shafeeq S and Jaydip Kumar Chakrabarti has observed that the recipient of the pure service should be either the Central Government or State Government or Union territory or local authority. A Government Entity does not qualify for any of the four categories. So the exemption as provided in serial no. 3 in the table of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017, as amended, is not applicable for FCI being a Government Entity. FCI, a statutory corporation established under the Food Corporations Act, 1964, functions under the Ministry of Consumer Affairs, Food and Public Distribution. It is entrusted with procurement, storage, movement, and distribution of food grains to ensure food security and implement the Public Distribution System (PDS). To safeguard its depots and offices across West Bengal and Sikkim, FCI engaged security agencies for deployment of guards. Since the introduction of GST on July 1, 2017, FCI has been discharging GST on such services—initially under forward charge and later under reverse charge mechanism. However, a transaction audit by the Comptroller and Auditor General (C&AG) raised an objection suggesting that security services supplied to FCI could qualify as “pure services” provided to a Government Entity in relation to constitutional functions under Article 243G, thereby attracting exemption under Serial No. 3 of Notification No. 12/2017–Central Tax (Rate). Seeking clarity, FCI approached the Authority for an advance ruling. The central issue before the Authority was whether security services provided to FCI qualify as “pure services” supplied to a Government Entity in relation to functions entrusted under Article 243G/243W of the Constitution and are thus exempt from GST? The Authority observed that supply of security guards does not involve any transfer of goods or works contract elements. Therefore, such services meet the definition of “pure services” under the exemption notification. After examining the Food Corporations Act, 1964, the Authority noted that FCI Was established by an Act of Parliament, Is fully controlled and financed by the Central Government, and performs statutory functions related to procurement and distribution of food grains. Accordingly, FCI qualifies as a “Government Entity” under Notification No. 12/2017. However, it does not qualify as a “Governmental Authority” since it does not directly discharge functions entrusted to Panchayats or Municipalities under Articles 243G or 243W. The Authority acknowledged that Public Distribution System (PDS) is listed under Entry 28 of the Eleventh Schedule to Article 243G of the Constitution. It held that security services for safeguarding food grain depots are ancillary and incidental to PDS functions, and therefore are “in relation to” constitutional functions. Despite satisfying two key conditions—being a pure service and being related to Article 243G functions—the Authority denied exemption. It noted that after amendments effective January 1, 2022, Serial No. 3 of Notification No. 12/2017 restricts exemption to services provided only to Central Government. State Government, Union Territory, and Local Authority. The expressions “Governmental Authority” and “Government Entity” were omitted from the exemption entry. Since FCI is classified as a Government Entity and not the Central Government itself, it does not fall within the eligible recipient categories. The Authority ruled that the exemption under Serial No. 3 of Notification No. 12/2017–Central Tax (Rate) is not applicable to security services provided to FCI, as FCI is a Government Entity and not covered under the specified recipient categories. Ruling Details Applicant’s Name: Food Corporation of India Citation: JURISHOUR-207-AAR-2026(WB) Ruling Date: 27/02/2026 Click Here To Read Ruling Read More: GST Exemption Allowed on Segregated Waste Transportation Services Provided to Howrah Municipal Corporation: AAR

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