In re Padmavathi Hospitality & Facilities Management Service (GST AAR Tamilnadu)
The decision of the Honb’le High Court on the writ will be applicable on the GST authorities who are also the respondents in the writ. This Authority functions within the limitations prescribed under Section 97 and 98 of the GST Act 2017. In as much as the State/Center Jurisdiction authorities are respondents to the Petition before Hon’ble High Court and the subject matter revolves on the leviability of GST, we find that the application cannot be admitted as per Proviso to Section 98(2) of the CGST /TNGST ACT as the question raised is already pending in the Hon’ble Madras High Court.
The application filed by M/s. Padmavathi Hospitality & Facilities Management Service is rejected under Proviso to Section 98(2).
AAAR Order:Dismissal of AAR application for pendency of Appeal with HC valid: AAAR
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, TAMIL NADU
Note: Any appeal against this Advance Ruling order shall lie before the Tamil Nadu State Appellate Authority for Advance Rulings, Chennai as under Sub Section (1) of CGST Act / TNGST Act 2017, within 30 days from the date on the ruling sought to be appealed is communicated.
At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.
M/s. Padmavathi Hospitality & Facilities Management Services, New No.51, Old No.117, 2-B, JVL Towers, 2nd Floor, Nelson Manickam Road, Aminjakarai, Chennai-600029 (hereinafter referred as ‘Applicant’) is registered under the GST Act 2017 vide GSTIN No. 33AAIFP7751M1ZR. The applicant is engaged in providing Housekeeping/Cleaning including Pest Control services and Security services as bundled services to Directorate of Medical Education(DME) that includes Government Medical College Hospitals, Government Medical Colleges and Government Nursing Colleges. The applicant has sought Advance Ruling on the following questions:
1. Whether services provided by Padmavathi Hospitality & Facilities Management Services (PHFMS) to DME are classifiable as a function entrusted to a Panchayat or a Municipality under the constitution? If not then can we conclude that no exemption is available to PHFMS?
2. Whether services provided by PHFMS to DME is exempted under Sl.No.3 of Notification 12/2017 Central Tax dated 28.06.2017 read along with amendment dated 25.01.2018?
3. Whether Services provided by PHFMS to DME including institutions of Government Hospitals and colleges are liable for GST or not? If yes, what is the rate of GST applicable to these services
4. Whether services rendered by PHFMS to DME can be classified as pure services or Composite Supplies?
The applicant submitted a copy of challan evidencing payment of application fees of Rs.5, 000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017.
2.1 The applicant has stated that they provide Housekeeping/cleaning including pest control services, security services to Directorate of Medical Education (DME) that includes Government Medical College Hospitals, Government Medical Colleges and Government Nursing Colleges. The applicant provides the above services to 95 Government Hospitals and colleges within Tamil Nadu. They have been providing these services since 2013 by way of 3 year contract that was renewed in 2016 which expires in 2019. The applicant has stated that they now intend to renew the contract by participating in tender for outsourcing of housekeeping and security services in 94 Government Hospitals, Colleges and Schools, Colleges for Nursing under the control of DME. They have made application for tender to DME along with other service providers. They have quoted contract price with GST @18 % for the above services. However, DME has also received alternate quotation from other service provider M/s Krystal Integrated Services (KRYSTAL) who is bidding with no GST. KRYSTAL seems to have participated in the tender with no GST and is also claiming that GST is not applicable for such services to Government hospitals and colleges. The applicant seeks clarification as to whether GST is applicable for the above services to Government Medical Colleges and Hospitals.
2.2 As per the applicant’s opinion, GST @18% will be applicable to housekeeping/cleaning, pest control and security services provided as bundled service to Government hospitals and colleges due to the reasons cited below:
i. As per the exemption Notification 12/2017 Central Tax(Rate) dated 28.06.2017 under chapter 99 read with amendment issued on 25.01.2018 Both refers to services provided “to the Central Government, State
ii. Government or Union Territory or Local Authority or Government Authority by way of any activity in relation to any function entrusted to Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of Constitution.
iii. The applicant has stated that their services are not falling under the above categories of Article 243G and 243 W of Indian Constitution and so GST exemption is not available in this instance.
iv. Sanitation and similar services are classified under SAC 99945. The applicant has referred to the Advance Ruling order of West Bengal , wherein it is ruled that “………………….. It includes sweeping and cleaning, but only with reference cleaning of road/street. Cleaning of hospital premises is not therefore classified under sanitation or similar service. The service, the applicant bundled under the description ‘Scavenging Services’ are therefore not exempt under S.No.3 of exemption notification.”
3.1 The applicant was given an opportunity to be personally heard and was heard on 26.09.2019. The applicant appeared and stated that they have filed a W.P. No.24412 of 2019 & WMP No. 24145 of 2019 on the same issue against TamilNadu Medical Services Corporation & Directorate of Medical Education and against the Department. The State Jurisdiction officer also appeared for the hearing and submitted that the WP was filed in Hon’ble High Court and gave a written submission stating that the applicant is not eligible for exemption at Sl.No. 3 of Notification No. 12/2017 as they provide only Manpower services. The applicant was informed that as per Section 98(2) of CGST Act 2017, as the question raised is already pending in Hon’ble High Court, this authority cannot rule on the issues raised. They informed that they will file copy of Writ Petition. The applicant furnished written submissions during the hearing
3.2 The State Jurisdictional Authority in the written submission has stated that the applicant has filed writ in the High Court of judicature at Madras for the same subject sought in the advance ruling and has furnished the comments raised on the question as given below:
i. Whether services rendered by Padmavathy hospitality & Facility Management services is falling under Pure services?
The Goods and service tax act 2017 defines “services” in Section 2(102). it means anything other than goods money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.
Definition for the term “pure services” is not described either in GST act or in the Notification No.12/2017-central tax (rate) dated 28.06.2017. In such cases any supply which is either deemed as services under Schedule II of CGST Act or which are not covered under the definition of goods shall be categorized as pure services. Section 2(52) of the goods and service tax act 2017 defines “goods” as a kind of movable property which are agreed to be severed before supply or under a contract of supply. The supply of services offered to the government involves not only of manpower but also goods and consumables like cleaning chemicals and liquid soaps. Further there is no possibilities for matching the kind of service offered by Padmavathy hospitality & Facility management services with the schedule-II (Activities or transactions to be treated as supply of goods or supply of services). Therefore the above category of services cannot be treated as Pure services.
ii. Whether services rendered by Padmavathy hospitality & Facility management services is exempted under S.No 3 of Notification No.12/2017-central tax (rate) dated 28.06.2017?
The notification no 12/2017 dated 28.06.2017 is provided to services involves only supply of services ie., pure services and not for services involving both goods and services no exemption can be granted to these kinds of services. Further the exemption is granted only when pure services are related 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 security services are neither enlisted in Article 243G nor in Article 243W of the Constitution. The hospital services are listed in Article 243G and in Article 243W of the Constitution (Health and sanitation including hospitals Primary health centres and dispensaries). The concerned matter deals with the tender floated by the Directorate of medical education which involves hospital and security services to hospitals, medical colleges, college of nursing and school of nursing. Though DME is falling under State government the hospital and security services in DME are not related to functions entrusted to Panchayat/Municipality under Articles 243G & 243W.
iii.Whether services rendered by Padmavathy hospitality & Facility management services to DME are liable for GST?
Yes, the services are to be taxed at the rate of 18% for both security and cleaning services.
3.3 In the written submission furnished by the applicant during the PH held on 26.09.2019, they inter-alia stated that
> PHFMS is a partnership firm formed in the year 2012. They are primarily into the business of providing Housekeeping services, Pest Control Services, Supply of Manpower services, Security services and Services under works Contract basis to their clients in three states namely Tamil Nadu. Andhra Pradesh and Telangana . Some of their major customers are Directorate of Medical Education, TCS, Venkateshwara University, works contract services to Railways (Tirupati & Renigunta) ETC. One of the Major Customer to whom they provide Housekeeping, Pest Control, Security Services & Biomedical Waste Management is The Directorate of Medical Education, Tamil Nadu (DME) under whom all the State Government Medical Colleges are functioning.
> They provide Housekeeping, Pest Control Security, Security Services & Biomedical Waste Management as bundled services to 95 institutions including Government Medical College Hospitals, Government Medical Colleges and Government Nursing Colleges within Tamil Nadu that is functioning under DME. They have been providing these services to DME since 2013 by way of 3 year Tender contract.
> PHFMS bagged the tender which they applied to DME in the year 2016. This tender contract period is for a period of three years expiring in the year 2019. PHFMS has now along with other bidders have participated in an open tender for provision of housekeeping and security services It has quoted contract price with GST @ 18% for the above services. However, DME has also received alternative quotation from other service provider and one service bidder among others has given their bidding with No GST. KRYSTAL seems to have participated in the tender with NO GST and is also claiming that GST is fully exempt for such services provided to Government Hospitals and colleges under Notification No 12/2017 — CT (Rate) dated 28/06/2017 read along with amendment dated 25/01/2018.
> In the Tender application itself, it states for inclusion of GST for the services provided and the tender contract amount will be inclusive of taxes applicable for the services rendered. Hence, PHFMS even under the earlier service tax regime, have charged service tax on the services provided to DME as these services were taxable and PHFMS was collecting and paying service tax under the old regime. And even under the GST regime, PHFMS has collected and paid GST from DME from 01.07.2017 to till date. PHFMS used to raise Tax Invoice to DME for the above mentioned services rendered inclusive of GST and even the DME were Clearing the bills including GST, Now that the old tender contract period has expired and they had to apply afresh for the new tender contract to DME, they had made an application for the open Tender floated by DME on 19/02/2019 for providing housekeeping, Security Services, Pest Control & Bio Medical Waste Management Services in 95 government medical institutions under the control of Director of Medical Education Tamilnadu. PHFMS has quoted the bid value of tender including the GST applicable for the services rendered.
> However DME is of the opinion that the services provided to them is exempt from GST under exemption notification No 12/2017 – Central Tax (Rate) dt 28/06/2017 read along with amendment dt 25/01/2018 and the tender should be placed excluding GST. DME has based their opinion on note given by an alternative bidder M/s Krystal Integrated services Private Limited and Independent opinion from a Chartered Accounting Firm Sanjiv Shah & Associates. Furthermore, the alternative bidder namely M/s Krystal Integrated services Private limited had given their quote for contract price exclusive of GST based on the above Government notification stating that the services rendered are fully exempt under Notification No 12/2017 read along with amendment dated 25/01/2018 that the services provided to Central Government, State Government or Local Authority or a Governmental Authority by way of activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to Municipality under Article 243W.
> M/s Krystal Integrated services Private limited in their bid had quoted that as per serial no 3 Of the notification No 12/2017-CT (Rate) dated 28/06/2017, GST is exempted for Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to Central Government, State Government or Union Territory or Local Authority or a Governmental Authority or a Government entity 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.
> Further as per serial number (3A) of the Notification No 12/2017 C T (Rate) dated 28/06/2017 GST is exempted for Composite supply of goods and services in which the value of supply of goods constitutes not more than 25% of the value of the said composite supply provided to Central Government, State Government or Union Territory or Local Authority or a Governmental Authority or a Government entity 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.
> Further DME is of the opinion that the services provided to DME, Tamilnadu Medical Services Corporation limited are nothing but performing functions entrusted to a panchayat under article 243G of the Constitution or functions entrusted to the Municipality under article 243W of the constitutions based on the following reasons:
1. One of the functions listed in twelfth schedule under article 243W of the constitution is “Public Health Sanitation, conservancy and solid waste management”.
2. Some of the functions listed in the eleventh schedule under article 243G of the constitution are “Health and sanitation, including Hospitals, Primary Health centres and dispensaries”
> DME view on the above said points is based on section 39 of the Tamil Nadu District Municipalities Act, 1920 wherein they have relied on the objects of Expenditure connected with public health stating that expenditure towards public health includes “(a) the construction and maintenance of hospitals and dispensaries and temporary places of reception within the municipality or without the municipality for treatment of infectious diseases occurring in the municipality; building hospitals, dispensaries or places of reception for the sick in general”
> Hence DME is of the opinion that all the 95 government hospitals coming under the said DME falls under the Municipality and that the functions entrusted to the municipality under article 243W of the constitutions is “Public Health Sanitation, conservancy and solid waste management”.
> The applicant has stated that the original notification 12/2017 read along with amendment 2/2018 issued on 25.012018 refers to “any activity in relation to any function entrusted to Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution”. They are of the opinion that all the 95 government hospitals falling under the DME comes under Municipality and not Panchayat and the notification specifically states activities entrusted to a municipality or panchayat. Hence it is very clear that this exemption notification applies to panchayat and municipalities only and does not attract to services provided by a private party to any state government hospitals.
> Under article 243G of the Constitution, activities in relation to any function entrusted to Panchayat is clearly listed out in the eleventh schedule. From the list of function specified, the function relevant to PHFMS is “health and sanitation including hospitals, primary health centres and dispensaries”. Hence it is clear that health and sanitation services including hospitals falling under panchayat and primary health centres are exempt and the hospitals which are covered under DME falls under municipality and not panchayat.
> Further, from the list of functions entrusted to a Municipality under Twelfth Schedule to Article 243W of Constitution the services as specified under clause (f) viz “Public Health Sanitation, Conservancy and Solid Waste Management………… ” is relevant to PHFMS. Hence it is very clear that the functions entrusted to Municipalities under article 243W which are relevant to PHFMS is only Public Health Sanitation, Conservancy and Solid Waste Management “ However PFHMS is providing housekeeping services to Hospitals falling under Municipalities and not public health sanitation services.
> The dictionary meaning of the term public health sanitation is “Sanitation refers to public health conditions related to clean drinking water and adequate treatment and disposal of human excreta and sewage Sanitation systems aim to protect human health by providing a clean environment that will stop the transmission of disease, especially through the fecal—oral route,”
> The term public health sanitation services as stated in twelfth schedule means sanitation and similar services which are classified under SAC99945 which includes sweeping and cleaning but only with reference to cleaning of roads and street and cleaning of hospital premises is not covered under sanitation or similar services.
> Their argument is based on one of the very recent advance ruling passed by west Bengal authority dt 09/09/2019 vide order no 21/WBAAR/2019-20 in the case of Altabur Rahman Mollah carrying business in the trade name of M/s Reliable Hospitality service. The said Reliable Hospitality services provides services similar to the services provided by PHFMS namely
1. Mechanised and automated cleaning of the Hospital premises including the toilets.
2. Mechanised and automated cleaning of the different parts of the academic and hostel area including the toilets
3. Manual cleaning of different parts of the campus of the institute. The applicant also supplies cleaning materials incidental or auxiliary to provisioning the cleaning services.
4. Security services etc
All the above said services are provided to state government run hospitals which are located in the municipalities. As per the advance ruling authority order in the above said case the activities, functions and services mentioned as per the applicant does not fall under any of the activities covered either under eleventh schedule or twelfth schedule of the constitution As per the order of advance ruling the applicant is not providing health services to any hospitals and that the scope of sanitation and similar services as classified under SAC 99945 includes the words cleaning and sweeping but these services are limited to cleaning and sweeping of roads and streets and not hospitals. Hence the services provided by the said applicant are not to be treated as sanitation services under the GST Act. Hence the supplies by the applicant is not qualified for exemption under SL no 3/3A Of the exemption notification 12/2017 read along with amendment made in 2/2018. Further the Advance ruling authority has stated that the exemption is extended to panchayat and municipalities and not to private parties. Here the applicant is a private party and does not qualify for the exemption.
> As per West Bengal advance ruling order no 21/WBAAR/2019-20 dated 09/09/2019 the services provided PHFMS does not fall under 3/3A of the exemption notification under GST.
> As per Haryana advance ruling order No HAR/HAAR/R/2018-19/01 Man power services to hospitals cum general medical colleges do not qualify for exemption under Sr No 66 of the notification 12/2017 — Central tax (Rate ) dt 28/06/2011.
> As per the advanced ruling order No 38/WBAAR/2018-19, dated 28.01.2019, benefit of exemption from the payment of GST is not available under Notification 12/2017-CT (Rate), dated 28062017 and WB Government Gazette Notification – 1136FT, dated 28th June, 2017 as amended for the supply of security services and the bundle of service described as “Scavenging Services”.
> In view of the above facts the nature and scope of services provided by PHFMS to DME neither falls under 243G nor 243W for exemption.
3.4 The applicant submitted the copy of WP 24412 of 2019 on 15.10.2019, wherein they have prayed the Hon’ble High Court to pass an order of interim injunction restraining the Tamil Nadu Medical Service Corporation from initiating or taking any further steps in finalizing the tender pending disposal of the main writ petition. The authorised representative of the applicant, while furnishing the WP, has stated that
> The Writ petition was filed not for clarification of applicability of GST on the services provided by them to Govt. Hospitals
> The writ petition was on the following grounds:
