In Re : VPSSR Facilities
GST
2018 (5) TMI 904 – AUTHORITY FOR ADVANCE RULING – DELHI – 2018 (13) G. S. T. L. 116 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING – DELHI – AAR
Dated:- 23-4-2018
Advance Ruling No. 06/DAAR/2018
GST
Pankaj Jain Member (Centre) and Vinay Kumar Member (State)
Present for the Applicant : Shri Deepak Gulati, Advocate Shri Satish Kumar Dixit, Advocate Shri Rajeev Sharma, Advocate
Present for the Revenue (Centre) : Ms. Jyoti Virdi, Assistant Commissioner, CGST, Division Janakpuri, Delhi West
Present for the Revenue (State) : Ms. Poonam Assistant Commissioner (W09), DGST Shri Isharam Pal, AVATO, DGST
Statement of Facts as per the Applicant:
The applicant has started the business of executing service contract, i.e. cleaning, sanitation, manpower supply, washing, housekeeping, etc. in Delhi and outside Delhi.
2. The instances of scope of contractor are as under:
(a) Mechanized/ Comprehensive cleaning at Rai
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f various size and depth and maintenance of the same in the running condition of colony area, and removal of accumulated garbage silt muck etc. to the nominated railway dustbin.
(g) Removal and disposal Garbage etc. from railway colonies.
Conservancy contract for daily removal of solid waste/ rubbish/ refuse / hedge cuttings etc. from the dustbins/ heaps or nominated sites of Railway Colony and other Railway premises.
(h) Removal and disposal of Garbage etc from railway stations.
Conservancy contract for daily removal of solid waste/ rubbish/ refuse / hedge cuttings etc. from the dustbins/ heaps or nominated sites of Railway Station.
3. The applicant has applied for and has been awarded a contract from Northern Railway, New Delhi for providing services in relation to housekeeping, cleaning, sanitation, waste management, locomotives cleaning and washing at Delhi. The Service contract of Northern Railway is to be performed in Northern Railwa
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al 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 234W of the Constitution.
7. Further, the Article 243W of the Constitution includes following services as municipality services.
(a) Urban Planning including town Planning.
(b) Regulation of land-use and construction of buildings
(c) Planning for economic and social development.
(d) Roads and bridges.
(e) Water supply for domestic, industrial and commercial purposes.
(f) Public health, sanitation conservancy and solid waste management.
(g) Fire services
(h) Urban forestry, protection of the environment and promotion of ecological aspects.
(i) Safeguarding the interests of weaker sections of society, including the handicapped an
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ing Cleaning, Platform Cleaning, Track Cleaning, Office & Waiting hall cleaning, Toilet cleaning, Circulating area cleaning etc.
(b) Mechanized cleaning of sheds
Shed floor, pits, urinals, desilting of manholes, underground drains and open drains, disposal of Industrial waste to Dumping ground, Loading of Ferrous Scrap, Cutting of grass and shrubs and removal of cobwebs etc.
(c) Providing On-Board Housekeeping Services in Trains
Cleaning of toilets, compartments, seats etc.
(d) Railway Building & Office cleaning.
Cleaning and upkeep of Office Chambers, rooms, cabins, corridors, Halls, roofing, circulating areas, toilets, metalled road and lawns etc.
(e) Mechanized Cleaning of Trains
Coaches of Trains, and Housekeeping of depot premises etc.
(f) Comprehensive Mechanized cleaning of railway colonies.
Cleaning of road and desilting of surface drains, manhole, gully trap and latrine system of various size and depth and
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; Their business is to execute service contract, i.e. cleaning, sanitation, manpower supply, washing, housekeeping, etc. in Delhi and outside Delhi, station, building cleaning, platform cleaning, track cleaning, office and waiting hall cleaning, toilet cleaning, circulating area cleaning, shed floor, pits, urinals, desilting of manholes, underground drains and open drains, disposal of industrial waste to dumping ground, loading of ferrous scrap, cutting of grass and shrubs and removal of cobwebs. So the same shall be classified under the levies and GST @ NIL taxable.
10. Further, as per the FAQ of CBEC in Q. No. 16, it is clearly specified in this answer that the functions entrusted to a municipality under the Twelfth Schedule to Article 243W of the Constitution. In point no. (f) public health, sanitation conservancy and solid waste management.
11. As per the above explanation, applicant services as mentioned above, are covered in heading no. 9994 – Sewa
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(a) Commercial or industrial buildings and premises thereof; or
(ii) Factory, plant or machinery, tank or reservoir of such commercial or industrial buildings and premises thereof, but does not include such services in relation to agriculture, horticulture, animal husbandry or dairying;
“Taxable Service” mean any service provided or to be provided to any person, by any other person, in relation to cleaning activity; (Section 65(105) (zzzd) of the Finance Act, 1994)
Thus, cleaning activity is a taxable service when provided to commercial organization.
14. Hon'ble Central Excise and Service Tax Appellate Tribunal (CESTAT) vide Service Tax Appeal no. ST/50007/2014-[DB] in the matter of M/s Mukesh Kalway v/s C.C.E. Bhopal, has held that
“To hold railways or airport authority as non-commercial organizations only on the ground that they are public utility organizations has no legal basis. Incidentally, it may be noted that the freight revenue of railways is more than dou
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28.06.2017, exempts the following services from GST:
Sl.No.
Chapter Heading
Service Description
GST Rate (%)
Condition
3
Chapter 99
Pure Services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central 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
Nil
NIL
16. Thus, as per S. No. 3, the services are exempt from GST only if services offered are:
(a) Pure services without any supply of material; and
(b) Are in relation to any functions which are entrusted to the Municipality as per Article 243W of the Constitution of India.
17. Services relating to public health, sanitation conservancy and solid waste management fall under Sche
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% under the Service Classification code Chapter heading 9994.
RELEVANT NOTIFICATIONS:
21. S. No. 3 of Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 2/2018 – Central Tax (Rate) dated 25.01.2018; S. No. 3 of Notification No. 9/2017 – Integrated Tax (Rate) dated 28.06.2017, as amended by Notification No. 2/2018 – Integrated Tax (Rate) dated 25.01.2018 and parallel SGST notifications:
Sl. No.
Chapter, Section, Heading, Group or Service Code (Tariff)
Description of Services
Rate (%)
Condition
(1)
(2)
(3)
(4)
(5)
3
Chapter 99
Pure Services (excluding works contract service or other composite supplies involving supply of any goods) provided to the 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 en
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under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.
Nil
Nil
Relevant Constitutional Provisions:
23. Article 243P of the Constitution of India defines that 'Municipality' means an institution of self government constituted under Article 243Q.
24. Article 243Q of the Constitution of India read as follows:
243Q: Constitution of Municipalities:-
(1) There shall be constituted in every State, –
(a) a Nagar Panchayat (by whatever name called) for a transitional area, that is to say, an area in transition from a rural area to an urban area;
(b) a Municipal Council for a smaller urban area; and
(c) a Municipal Corporation for a larger urban area, in accordance with the provisions of this Part:
Provided that a Municipality under this clause may not be constituted in such urban area or part thereof as the Governor may, hav
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visions of this Constitution, the Legislature of a State may, by law, endow-
(a) the Municipalities with such powers and authority as may be necessary to enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Municipalities, subject to such conditions as may be specified therein, with respect to-
(i) the preparation of plans for economic development and social justice;
(ii) the performance of functions and the implementation of schemes as may be entrusted to them including those in relation to the matters listed in the Twelfth Schedule;
(b) the Committees with such powers and authority as may be necessary to enable them to carry out the responsibilities conferred upon them including those in relation to the matters listed in the Twelfth Schedule.
27. The “Twelfth Schedule” of the Constitution of India reads as under:
1. &n
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le pounds; prevention of cruelty to animals.
16. Vital statistics including registration of births and deaths.
17. Public amenities including street lighting, parking lots, bus stops and public conveniences.
18. Regulation of slaughter houses and tanneries.
28. Hence, according to the Article 243W and Twelfth Schedule of the Constitution of India, the Municipalities have powers and responsibilities only with respect to the:
(i) preparation of plans for economic development and social justice and
(ii) performance of only those functions which may be entrusted to them by the Legislature of a State including those in relation to the matters listed in the Twelfth Schedule.
29. Hence, Municipalities do not have any responsibility or functions in relation to the Railways, which is exclusively the responsibility of the Central Government under Article 246 of the Constitution of India. The S. No. 22 of L
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r the impugned services to be covered under the said exemption notification, the following aspects need to be examined:
(i) Whether the said cleaning services can be considered as “pure services” or the same are works contract services/ composite services involving supply of goods also.
(ii) Whether the service receiver i.e. Northern Railways is covered in any of the categories i.e. 'Central Government' or 'State Government' or 'Union Territory' or 'Local Authority' or a 'Governmental Authority' or a 'Government Entity'.
(iii) Whether the said cleaning activity is in relation to any function entrusted to a Municipality under Article 243W of the Constitution of India.
32. As far as the first aspect mentioned above is concerned i.e. whether the cleaning services supplied by the applicant to the Northern Railways are 'pure services' or the same also involve supply of any goods, it i
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re not transferred to the Railways.
34. The Department of Trade & Taxes contended that the contract between the petitioner and the Railways is not just a service contract but the same is a works contract of a composite nature. The property in goods i.e. chemical is transferred by the petitioner to the Railways. The petitioner is required to calculate chemical/solvent per month and the same has to be delivered by the petitioner to the Railways. The contract stipulates that cost of chemicals and machines is included in activities mentioned in the schedule of unit rates.
35. However, the Hon'ble High Court held that the soaps, detergent, chemicals and solvent used purely for the purpose of cleaning and which are completely consumed, in the process of the execution of the above referred tasks, cannot be said to goods in which property could pass to the Railways. Hence, the same were held to be pure Service Contracts.
36. The FAQ : Government
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ontract services. The exemption is provided to services involves only supply of services and not for works contract services.
37. Accordingly, it is held that in the present case, the cleaning contracts of the applicant with the Northern Railways, which may involve use of consumables such as soap/ detergent/ chemicals of a minimal quantity and of a very nominal value are “pure service” contracts, in terms of S. No. 3 of Notification No. 9/2017 – Integrated Tax (Rate) dated 28.06.2017 as amended by Notification No. 2/2018 – Integrated Tax (Rate) dated 25.01.2018 and parallel CGST and SGST notifications.
38. As far as the second aspect is concerned i.e. whether the service receiver i.e. Northern Railways is covered in 'Central Government' or 'State Government' or 'Union Territory' or 'Local Authority' or a 'Governmental Authority' or a 'Government Entity' or not, it is observed that as per Section 3(8) of the Gener
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e Municipalities under Article 243W of the Constitution are exempted under S. No. 4 of Notification No. 9/2017 – Integrated Tax (Rate) dated 28.06.2017 and parallel CGST and SGST Notifications.
40. In the CESTAT Final Order No. ST/A/50646/2017-CU (DB) dated 06.02.2017, in the case of Mukesh Kalway V/s Commissioner of Central Excise, Bhopal (reported in 2017 (3) TMI-615), mentioned by both the Jurisdictional Officers (Centre and State), the issue was whether mechanised cleaning service provided for railways, diesel locomotives, railway station premises, General Manager's Office were taxable under the category of 'cleaning services' during the period July 2005 to March 2010. In the said case, the Hon'ble Tribunal after examining the scope of activities of railways and the premises of railway stations came to the conclusion that the Railways is a commercial organisation and cleaning services rendered to railways were taxable during the relevant period. However
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ey had argued that the renting of immovable property service in such markets cannot be considered as taxable service as the said markets were developed in discharge of Constitution responsibility under Article 243W of the Constitution of India and the 12th Schedule thereunder. They argued that they were not engaged in the trade or commerce and the shop rent out are not in the course of furtherance of business or commerce but are statutory responsibility under the Goa Municipality Act and are for discharge of Constitutional obligation.
42. However, Hon'ble CESTAT held that perusal of Entries 12 and 17 of Schedule Xll clearly shows that what has been mentioned thereunder is provisions of urban amenities and facilities, such as parks, gardens, playgrounds. The market cannot be considered to be similar in nature and therefore provision of markets cannot be considered to be, the responsibility under Sr. No. 12 of the 12th Schedule. Similarly Sr. No. 17 relates to street lig
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