In re Altabur Rahaman Mollah (M/s Reliable Hospitality service) (GST AAR West Bangal)
The Applicant, stated to be supplying facility management services like mechanised and manual cleaning, housekeeping, security services etc. to various Central Government and State Government hospitals, seeks a ruling as to whether exemption from payment of GST is available for such supplies in terms of Notification No 12/2017-CT(Rate) dated 28.06.2017 and WB Govt Gazette Notification-1136-FT dated 28.06.2017, as amended (hereinafter collectively referred to as “the Exemption Notification”).
AAR held that ‘Sanitation and similar services’, classified under SAC 99945, includes sweeping and cleaning, but only with reference cleaning of a road or street. Cleaning of hospital premises is not, therefore, classified under ‘Sanitation or similar service’. The services of the Applicant are, therefore, not exempt under SI No. 3 or 3A of the Exemption Notification No 12/2017-CT(Rate) dated 28.06.2017.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, WEST BANGAL
1.1 The Applicant, stated to be supplying facility management services like mechanised and manual cleaning, housekeeping, security services etc. to various Central Government and State Government hospitals, seeks a ruling as to whether exemption from payment of GST is available for such supplies in terms of Notification No 12/2017-CT(Rate) dated 28.06.2017 and WB Govt Gazette Notification-1136-FT dated 28.06.2017, as amended (hereinafter collectively referred to as “the Exemption Notification”).
1.2 Advance Ruling is admissible on the question under Section 97(2)(b) of the GST Act. The Applicant further submits that the question raised in the Application is neither decided by nor pending for decision before any authority under any provisions of the GST Act. The concerned officer from the Revenue does not object to admission of the Application.
1.3 The Application is, therefore, admitted.
2. Submissions of the Applicant
2.1 The Applicant submits that he supplies the following services:
a) Mechanised and automated cleaning of the hospital premises, including the toilets;
b) Mechanised and automated cleaning of the of different parts of the academic and hostel area, including the toilets;
c) Manual cleaning of different parts of the campus of the institute. The Applicant also supplies cleaning material incidental or ancillary to provisioning the cleaning services.
2.2 Exemption under SI No 3/3A is granted to services provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. The Applicant’s services, therefore, need to be an activity in relation to the functions listed under the Eleventh or the Twelfth Schedules of the Constitution. SI No. 22 of the Eleventh Schedule covers ‘health and sanitation, including hospitals, primary health centres and dispensaries’. SI No. 7 of the Twelfth Schedule covers ‘public health sanitation, conservancy and solid waste management’.
2.3 The Applicant is not providing ‘health service’ to any hospitals. The scope of ‘sanitation and similar services’, as classified under SAC 99945, in as much it includes ‘cleaning and sweeping’, is limited to cleaning and sweeping of roads and streets. Cleaning of hospitals is, therefore, not to be treated as ‘sanitation’ service under the GST Act. The Applicant’s supplies are, therefore, admittedly not qualified for exemption under SI No. 3/3A of the Exemption Notification.
3. Submission of the Revenue
3.1 The concerned officer from the Revenue submits that the above exemption is extended to Panchayats and Municipalities. The Applicant, being a private party, is not eligible for this exemption.
4. Observations & Findings of the Authority
4.1 In its Circular No. 51/25/2018-GST dated 31/07/2018 the Central Government clarifies that the service tax exemption under SI No. 25(a) of Notification No. 25/2012 dated 20/06/2012 (hereinafter the ST Notification) has been substantially, although not in the same form, continued under GST vide SI No. 3 and 3A of the Exemption Notification. SI No. 25(a) of the ST notification under the service tax exempts “services provided to the Government, a local authority or a governmental authority by way of water supply, public health, sanitation, conservancy, solid waste management or slum improvement and upgradation.” The Circular further explains in relation to the specific issue of ambulance service to the Government by a private service provider (PSP) that such service is a function of ‘public health’ entrusted to Municipalities under Art 243W of the Constitution, and, therefore, eligible for exemption under SI No. 3/3A of the Exemption Notification.
4.2 The above Circular leaves no doubt that the phrase ‘in relation to any function’, as applied in SI Nos. 3 and 3A above, makes no substantial difference between SI No. 25(a) of the ST Notification and SI No. 3/3A of the Exemption Notification. Under the previous service tax regime, the exemption was limited to certain functions specified in SI No. 25(a) of the ST Notification, whereas, under the GST, the ambit has been broadened to include all such functions as entrusted to a Panchayat or a Municipality under the Constitution.
4.3 The example of ambulance service provided by a PSP also makes it clear that the service provider need not be a Panchayat or a Municipality. The phrase in relation to any function’ refers not to who the service provider is or what activities the recipient of the service is engaged in, but only to what service the supplier is providing. If the service is an activity relatable to a function like public health, sanitation etc., listed under the Eleventh or the Twelfth Schedule under Art 243 G or 243 W of the Constitution, its supply to the government, governmental authority, local authority or a government entity should be exempt under SI No. 3/3A of the Exemption Notification, provided it is either a pure service or a composite supply where the supply of goods constitutes not more than 25% of the value.
4.4 The Applicant has submitted a copy of the work order issued by SSKM Hospital. It refers to dusting, scrubbing, mopping disinfecting the hospital premises, cleaning of toilets etc. The work order clearly mentions that GST @ 18% is applicable on the services. It is a State Government hospital and, therefore, the Applicant’s service in terms of the above work order qualifies to be a supply to the Government. The Applicant is supplying cleaning and sweeping service, which is a composite supply having supply of cleaning material ancillary or incidental to the principal supply of cleaning and sweeping service. Therefore, the only point that needs to be examined is whether the service being provided is an activity relatable to a function listed under the Eleventh or the Twelfth Schedule under Art 243 G or 243 W of the Constitution.
4.5 Eleventh schedule of Indian Constitution contains the following items:
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