2019 (9) TMI 514 - AAR - GST

Applicant denied GST exemption for services to government hospitals

The Authority ruled that the Applicant was not eligible for GST exemption for security, cleaning, and sweeping services provided to government hospitals. ... Supply of facility management services like mechanised and manual cleaning, housekeeping, security services etc. to various Central Government and State Government hospitals - 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 - HELD THAT:-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. 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? - HELD THAT:- ‘Security services’ provided to Government Hospitals and Medical Colleges are not covered under the either lists. ‘Cleaning and sweeping services’ can be considered as related to the function listed under Sl No. 26 of the Eleventh Schedule, namely “Health and sanitation, including hospitals, primary health centres 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 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 cleaning of a road or street. Cleaning of hospital premises is not, therefore, classified under ‘Sanitation or similar service’. Thus, the services the Applicant are, therefore, not exempt under Sl No. 3 or 3A of the Exemption Notification. Issues:1. Admissibility of the Application2. Interpretation of Exemption Notification for facility management servicesAdmissibility of the Application:The Applicant sought a ruling on the availability of GST exemption for supplying facility management services to government hospitals. The application was admitted as the question was not previously decided by any authority under the GST Act.Interpretation of Exemption Notification for facility management services:The Applicant provided mechanised and manual cleaning services to government hospitals and argued for exemption under specific notifications. However, the Revenue contended that the exemption was not applicable to private parties. The Authority analyzed Circulars and found that services related to public health and sanitation are eligible for exemption. The Applicant's service to a State Government hospital qualified as a supply to the Government, meeting the exemption criteria. The Authority referred to the Constitution's Eleventh Schedule to determine if the services were related to listed functions. It concluded that the Applicant's services did not fall under the exemption, as they were not classified as sanitation services under the GST Act.The Authority ruled that the Applicant was not eligible for GST exemption for security, cleaning, and sweeping services provided to government hospitals. The ruling remains valid unless declared void under the GST Act.