Housekeeping services to educational institutions not exempt from GST under Section 12 notification

The AAR, Tamil Nadu ruled that housekeeping services provided to IIITDM Kancheepuram are not exempt from GST. The authority distinguished between housekeeping services (cleaning, gardening, security) and sanitation/solid waste management services. IIITDM does not qualify as a governmental authority under the exemption notification, and the services provided cannot be equated to constitutional functions of municipalities/panchayats. The applicant cannot lawfully raise invoices without GST for these services.

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The core legal questions considered by the Authority for Advance Ruling (AAR) in this case were:

(i) Whether cleaning and sanitary services rendered under the head "Housekeeping" services to a public technical and research institution, specifically an Institute of National Importance established by the Government of India, are exempt from Goods and Services Tax (GST) liability;

(ii) Whether the applicant can lawfully raise invoices without GST on the basis of a letter from the said Institute claiming exemption under Ministry of Finance Notification No. 13/2023-CT (Rate) dated 19.10.2023;

(iii) The overall applicability and interpretation of the exemption notifications under the CGST Act, 2017 and related rules vis-`a-vis the services provided.

Issue-wise Detailed Analysis

Issue 1: Applicability of GST exemption on housekeeping/cleaning services provided to the Institute

The relevant legal framework comprised Notification No. 13/2023-CT (Rate) dated 19.10.2023, which amended the original exemption Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 by inserting serial number 3B. This entry exempts services provided to a "Governmental Authority" by way of water supply, public health, sanitation conservancy, solid waste management, and slum improvement and upgradation.

The Court examined the definition of "Governmental Authority" under clause (zf) of the exemption notification, which requires that such authority or body be set up by an Act of Parliament or State Legislature or established by the Government with at least 90% equity or control, and must carry out functions entrusted to a Municipality under Article 243W or to a Panchayat under Article 243G of the Constitution.

It was found that the Institute in question, although an Institute of National Importance funded by the Ministry of Education, does not perform any constitutional functions related to water supply, sanitation, or solid waste management, which are municipal or panchayat responsibilities. Therefore, it does not qualify as a "Governmental Authority" under the exemption notification.

Further, the nature of the services provided by the applicant was scrutinized. The applicant provided housekeeping services including cleaning, toilet cleaning, gardening, and security, which were distinct from the broader sanitation, water supply, and solid waste management services contemplated under the exemption notification. The invoices and work orders clearly described the services as "Housekeeping Services" involving supply of manpower for cleaning and related activities rather than sanitation conservancy or solid waste management.

The Court concluded that the exemption under Notification No. 13/2023-CT (Rate) does not apply to housekeeping services rendered to the Institute.

Issue 2: Whether the applicant can raise invoice without GST as requested by the Institute

The Institute had issued a letter requesting the applicant to raise invoices without GST, relying on the Ministry of Finance Notification No. 13/2023-CT (Rate) dated 19.10.2023, which exempts sanitation, water supply, and solid waste management services provided to a Governmental Authority.

Given the Court's finding that the Institute is not a Governmental Authority as defined and that the services provided do not fall within the exempted categories, the request to raise invoices without GST was found to be without legal basis.

Therefore, it was held that it would not be lawful for the applicant to raise invoices without charging GST in this case.

Issue 3: Applicability of exemption under Serial No. 66 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017

This entry exempts certain services related to educational institutions, including security, cleaning, or housekeeping services performed in such institutions, but only when provided to educational institutions offering pre-school education up to higher secondary school or equivalent.

The Court noted that the Institute is a higher education and research institution and does not fall under the category of educational institutions covered by this exemption. Thus, the exemption under Serial No. 66 was not applicable.

Competing Arguments and Treatment

The applicant argued that the Institute, being an Institute of National Importance established by the Government of India, should be considered a Governmental Authority and that the services provided were sanitation services exempted under the notification. The Institute's letter supported this position.

The Court, however, distinguished between housekeeping services and sanitation services, emphasizing that the exemption applies only to specific sanitation-related services provided to Governmental Authorities carrying out municipal or panchayat functions. The Court relied on the statutory definition of Governmental Authority and the nature of functions entrusted to such bodies under the Constitution to reject the applicant's interpretation.

The Court also considered the tender documents, invoices, and work orders, which described the services as housekeeping rather than sanitation, further supporting its conclusion.

Conclusions

The Court concluded that:

• The Institute does not qualify as a Governmental Authority under the exemption notification;
• The housekeeping/cleaning services provided by the applicant do not fall within the exempted categories of sanitation, water supply, or solid waste management;
• The exemption under educational institution-related services does not apply as the Institute is not a school or equivalent;
• Accordingly, the services provided are liable to GST;
• The applicant cannot lawfully raise invoices without GST as requested by the Institute.

Significant Holdings

The ruling crystallizes the principle that:

"The mere creation of an authority or board or any other body by any Government, or by an act of Parliament or State Legislature with 90 percent or more participation by way of equity or control, is not enough to categorise a body as a 'Governmental Authority' whereas such bodies are required to carry out any function entrusted to a Municipality under article 243W of the Constitution or to a Panchayat under article 243G of the Constitution, in order to attain such status."

Further, it was held that:

"The 'housekeeping' services provided by the applicant to IIITDM, cannot be equated to 'sanitation, water supply and solid waste management services', in any manner whatsoever, and accordingly the provisions of Notification No. 13/2023-CT (Rate) dated 19.10.2023, do not apply to the instant case."

And finally:

"It will not be lawful on the part of the applicant to raise invoice without GST, in the instant case."

The ruling thus clarifies the scope and applicability of GST exemption notifications concerning services provided to Governmental Authorities and educational institutions, emphasizing strict adherence to definitions and the nature of services rendered.

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