2021 (1) TMI 436 - AAR - GST

Outsourced hospital staff services not GST exempt

The ruling determined that the services of providing Para-medical Administrative, Technical, and other Staff on an outsource basis to Seth L.G. General ... Pure services - Exemption under Notification No. 12/2017-Central Tax (Rate) - Functions entrusted to a Municipality under Article 243W - Definition of Local authority, Governmental authority and Government entityPure services - Exemption under Notification No. 12/2017-Central Tax (Rate) - Functions entrusted to a Municipality under Article 243W - Definition of Local authority, Governmental authority and Government entity - Whether supply of para-medical, administrative, technical and other manpower on outsource basis to Seth L.G. General Municipal Hospital is exempt from GST under Serial No. 3 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 - HELD THAT: - The exemption in Serial No. 3 applies only if three conditions are satisfied: (i) the supply is a 'pure service' (i.e., not a works contract or composite supply involving goods), (ii) the service is rendered in relation to a function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W of the Constitution, and (iii) the service recipient is the Central Government, a State Government, a Union Territory, a Local Authority, a Governmental Authority or a Government Entity as defined. On the material before the Authority the manpower supply constituted only services without supply of goods and therefore qualified as 'pure services' (para 10.1). The services related to healthcare functions listed under Articles 243G/243W and the para-medical and other staff were found to be in relation to the Municipality's public health function (para 10.2). However, the applicant did not produce evidence to establish that Seth L.G. General Municipal Hospital falls within the statutory definitions of Central/State Government, Local Authority, Governmental Authority or Government Entity for the purpose of the notification. In absence of documentary proof that the recipient is covered by those definitions, the benefit of the exemption cannot be extended (paras 10.3.1, 10.3.2). Applying these conclusions, the exemption under Serial No. 3 cannot be availed for the supplies to Seth L.G. General Municipal Hospital on the record before the Authority (para 11). [Paras 10]Exemption under Serial No. 3 of Notification No.12/2017 is not available for the manpower supply to Seth L.G. General Municipal Hospital on the facts and evidence placed before the Authority.Final Conclusion: The Advance Ruling answers the question in the negative: the supply of para medical, administrative, technical and other manpower on outsource basis to Seth L.G. General Municipal Hospital is not exempt from GST under Serial No. 3 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 on the record before the Authority. Issues Involved:1. Applicability of GST on the supply of contract work service of Man Power and House Keeping in Government Municipal Corporation, Government Hospital, and other Government Departments.2. Exemption of GST on services provided to Municipality under Article 243W and Panchayat under Article 243G.3. Eligibility for GST exemption under Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017.Comprehensive Issue-wise Detailed Analysis:Issue 1: Applicability of GST on the supply of contract work service of Man Power and House Keeping in Government Municipal Corporation, Government Hospital, and other Government Departments.The applicant is engaged in providing contract work services of Man Power Recruitment & Supply by outsourcing in Government Departments, including Government Municipal Corporations and Hospitals. The issue raised is whether such services are subject to GST. The applicant has been billing these services with 9% CGST and 9% SGST, but the service recipients, such as Seth L.G. Hospital, refuse to pay GST, claiming they are exempt.Issue 2: Exemption of GST on services provided to Municipality under Article 243W and Panchayat under Article 243G.The applicant contends that services provided to municipalities and panchayats are exempt from GST under Article 243W and Article 243G of the Constitution. They seek clarification on whether their services fall under this exemption, as they have been unable to secure payment for GST from Seth L.G. Hospital since April 2019.Issue 3: Eligibility for GST exemption under Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017.The ruling examines whether the services provided by the applicant qualify for GST exemption under Serial No. 3 of Notification No. 12/2017-Central Tax (Rate). This notification exempts '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.'Discussion and Findings:The ruling identifies three conditions for exemption under the notification:1. The services must be 'pure services' without any supply of goods.2. The services must relate to functions entrusted to Panchayats under Article 243G or Municipalities under Article 243W.3. The recipient must be a Central Government, State Government, Union Territory, Local Authority, Governmental Authority, or Government Entity.Analysis of Conditions:1. Pure Services:- The services provided by the applicant are purely manpower supply services without any involvement of goods, thus meeting the first condition.2. Relation to Functions Entrusted to Panchayats/Municipalities:- The services provided are related to hospital services, which are listed under Article 243G (Health and sanitation, including hospitals) and Article 243W (Public health, sanitation conservancy). Therefore, the second condition is satisfied.3. Recipient Qualification:- The ruling scrutinizes whether Seth L.G. Hospital qualifies as a Local Authority or Governmental Authority. The definitions provided under the CGST Act and related notifications are considered. However, the applicant fails to provide evidence that Seth L.G. Hospital meets these definitions.Conclusion:In the absence of evidence proving that Seth L.G. Hospital qualifies as a Local Authority or Governmental Authority, the exemption under Notification No. 12/2017-Central Tax (Rate) cannot be extended. Consequently, the services of providing Para-medical Administrative, Technical, and other Staff on an outsource basis to Seth L.G. General Municipal Hospital are not exempt from GST.Ruling:Question 1: Whether services of providing Para-medical Administrative, Technical, and other Staff on an outsource basis to Seth L.G. General Municipal Hospital are exempted or notRs.Answer: Answered in Negative.