The rollout of GST in July 2017 is probably one of the biggest disruptive policies that Indian government has ever made. Where some sectors are benefitted by this new GST regime, many sectors are adversely affected by the higher GST rates. Such one sector is private security industry (PSI) which has been registering the growth of 20 per cent on the Y-o-Y basis for a past few years, as per the joint study of FICCI and BDO.

Though the industry is still tottering on its way to be called an organized and streamlined “industry”, it is counted amongst the largest employers as well as tax-payers industries in India. Indian private security industry employs about 8.5 million people, including both men and women.

While this number only continues to increase up to a notch every year, in fact, is expected to employ more than 4 million people until 2022, the implementation of 18 per cent GST on the private security agencies, which are basically small and mid-sized businesses, hinders its way forward. This current GST rate is creating cash-flow problems between the mid-level agencies and employees.

GST filing date tightens cashflow

The GST return date for private security firms is 20th of every month; the firms have to complete salary disbursal process until 10 of the same month, wherein the cycle of payment from clients takes 60-90 days. Amidst this kind of hotchpotch, delayed salary disbursal is the direct consequence of financial crises that companies are facing under current GST compliance. And, this frequently leads to resignations from the employees. If the revisions in GST policy for private security firms are not made, the sector could fall short of employment and growth opportunities.

As demanded by private security firms, GST should be levied on the service users, not on service providers, which are already burdened with heavy costs and expenses. The lowered GST rates may open up a myriad of employment opportunities and scope of exponential growth in coming years. Here’s how:

Emergence of entrepreneurs

The revisions in GST for private security firms will attract more business enthusiasts to hone their entrepreneurial skills and form organized agencies. Offering security services such as bodyguards, guard dogs, and parking security in retirement age is one of the most convenient plans army officials have. They are ready to invest in private security agencies, which would give them better ROI during the later stages when there is a need for financial independence. With high taxation policies, the loss on company’s part is quite evident nowadays keeping the wannabe entrepreneurs at bay.

Job security for the employees

Presently, PSI creates over a lakh of jobs every year which are leveraged by the migrants from villages and tier-III cities. As of now, the SMEs first have to borrow the money at high interest rates to deposit GST before they receive payments from the clients. If the GST is not reduced to rates suitable for the companies, existing companies, going towards bankruptcy, may shut down their business leaving hundreds of thousands of security guards and detectives jobless. If given relief from 18 per cent GST, it will be easier for one to set up a credible private security firm and invest the money in hiring more security professionals. Moreover, only a few private security companies provide their employees with benefits like medical claim, accommodation, and travel allowance etc. Revisions in GST rates will motivate the agencies to become organized, credible, and responsible in their business.

Training and development of unskilled labour

The manned guarding segment of private security industry employs majorly the tribal people or those who come from underprivileged parts of the country. And, the tier I & II cities have witnessed an ever-growing demand for electronic surveillance and armed guards. It’s high time that private security agencies should have educated and skilled labour to fuel their growth. If the rates are reduced at some extent, the companies can manage to invest in training and development of unskilled labour while helping the skilled ones to advance further, which is a bit challenging to do under the present GST regime for Private Security firms.

Innovation in Electronic Security Technology

With the continual infrastructural developments across the country, the focus is now shifting from manned guards to AI-powered electronic surveillance. Also, the emphasis on “Digital India” triggers the requirement of technocrats who can design and develop cost-effective tech-enabled products and well-trained armed guards. For the adoption of new technological advances, the workforce should be versed with the latest practices and processes of international standards in the industry. To keep up with such dynamic trends, private security firms are likely to do massive hiring only if backed up by the lowered GST rates.