The Hon’ble AAR, West Bengal in the matter of Reliable Hospitality Service has denied an exemption to the Applicant providing supplies facility management services like mechanized and manual cleaning, housekeeping, security services etc. to Government hospitals.
M/s Reliable Hospitality Service (“the Applicant”), supplies facility management services like mechanized and manual cleaning, housekeeping, security services, etc., to various Central Government and State Government hospitals.
- Whether the service being provided is an activity relatable to a function listed under the Eleventh or the Twelfth Schedule under Article 243G or 243W of the Constitution?
- Whether exemption from payment of GST is available for such supplies in terms of Notification No 12/2017-CT(Rate) dated June 28, 2017, and WB Govt Gazette Notification-1136-FT dated June 28, 2017, as amended (“the Exemption Notification”).
The Hon’ble AAR, West Bengal vide Order No. 21/WBAAR/2019-20 dated September 9, 2019, held as under:
- Exemption under S. No 3/3A of the Exemption Notification 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 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.
- lf the service is an activity relatable to a function like public health, sanitation etc., listed under the Eleventh or the Twelfth Schedule under Art. 243G or 243W of the Constitution, its supply to the government, governmental authority, local authority or a government entity should be exempt under S. 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.
- The Applicant is supplying cleaning and sweeping service, which is a composite supply having a 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 243G or 243W of the Constitution.
- ‘Security services’ provided to Government Hospitals and Medical Colleges are not covered under either list.
- ‘Cleaning and sweeping services’ can be considered as related to the function listed under Serial No. 26 of the Eleventh Schedule, namely “Health and sanitation, including hospitals, primary health centers, and dispensaries”, provided ‘sanitation service’, as classified under SAC 99945, includes sweeping and cleaning of places like hospitals etc. As the scope of the functions listed under the Eleventh Schedule is considered with respect to the applicability of the Exemption Notification under the GST, the scope of any service should be determined in terms of the Scheme of Classification of the Services referred to in Explanation 3(i) of the Exemption Notification.
- ‘Sanitation and similar services’, classified under SAC 99945, includes sweeping and cleaning, but only with reference to the cleaning of a road or street. Cleaning of hospital premises is not, therefore, classified under ‘Sanitation or similar service’.
- Thus, the Applicant’s service does not fall within the ambit of the phrase “in relation to any function” as applied in Sr. No. 3 and 3A of the Exemption Notification, therefore, not exempt from GST.
Citation: 2019 (9) TMI 514