2018 (5) TMI 904 – AUTHORITY FOR ADVANCE RULING – DELHI – 2018 (13) G. S. T. L. 116 (A. A. R. – GST) – Levy of GST on Service contract with railways – cleaning, sanitation, manpower supply, washing, housekeeping, etc. in Delhi and outside Delhi – pure service contract or works contract – N/N. 9/2017-Integrated Tax (Rate) dated 28.06.2017 – Whether the contract for Railway station sanitation and / or cleaning, Train cleaning & Railway Premises cleaning would be exempt from GST vide S. No. 3 of N/N. 9/2017 – Integrated Tax (Rate) dated 28.06.2017 (as intimated by Northern Railway vide its letter dated 20.11.2017), what would be the impact of GST exemption, if the above contract is pure service contract or work contract (involving sanitation labour and material)?
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Whether 'pure services' or the same also involve supply of any goods? – Held that: – the cleaning contracts of the applicant with the Northern Railways, which may involve use of consumables such as soap/ detergent/ chemica
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said Notification as 'Central Government'.
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Whether the cleaning services rendered by the applicant are in relation to any function entrusted to a Municipality under Article 243W of the Constitution? – Held that: – The Railways cannot be called a Municipality under Articles 243P and 243Q of the Constitution of India. Further, the functions of Railways i.e. transport of goods or passengers are not covered in Schedule XII of the Constitution which covers the constitutional functions of Municipalities. The cleaning services supplied to Railways i.e. cleaning of locomotives, railway stations, railway lines provided by the applicant cannot be said to be covered in Clause (6) of Schedule XII of the Constitution which covers 'public health, sanitation conservancy and solid waste management' functions of the Municipalities. The Municipalities are constitutionally entrusted with such functions in relation to urban areas but they are not entrusted with such functions in relation to Railway
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pak 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 Railway Stations. Station Building 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 a
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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 Railway, Delhi and outside Delhi. 4. The scope of work as per tender document is as under: No. Description of activity 1 Whether the contract for Railway station sanitation and / or cleaning, Railway line sanitation and / or cleaning, Train and Engine Sanitation and / or cleaning and involving other sanitation work would be exempt from GST, what would be the impact of GST exemption, if the above contract is pure service contract or work contract (Involving sanitation labour and material). 5. The
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ly 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 and mentally retarded. (j) Slum improvement and upgradation. (k) Urban poverty alleviation. (l) Provision of urban amenities and facilities such as parks, gardens, playgrounds. (m) Promotion of cultural, educational and aesthetic aspects. (n) Burials and burial grounds; cremations, cremation grounds; and electric crematoriums. (o) Cattle pounds, prevention of cruelty to animals. (p) Vital statistics including registration of births and deaths. (q) Public amenities including street lighting, parking lots, bus stops and public conveniences. (r) Regulation of slaughter houses and tanneries. Details of Question(s) on which Advance Ruling is requested: 8. Whether the contract for
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ing of road and desilting of surface drains, manhole, gully trap and latrine system of 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 conrtact 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. Would be exempt from GST vide S. No. 3 of Notification No. 9/2017 – Integrated Tax (Rate) dated 28.06.2017 (as intimated by Northern Railway vide its letter dated 20.11.2017), what would be the impact of GST exemption, if the above contract is pure service contract or work c
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above, are covered in heading no. 9994 – Sewage and waste collection, treatment and disposal and other environmental protection services. Services by way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets. Comments of Jurisdictional Officers (Centre & State): 12. The following aspects need to be looked at: i. Whether activities carried out by M/s VPSSR Facilities relating to mechanized cleaning of station, rail wagon, railway office, sheds etc. is covered by the taxable entry -"cleaning activity"? ii. Whether cleaning and sanitation services provided to railway stations, trains, sheds, railway colonies and railway offices are in relation to any function entrusted to a Municipality under Article 243W of the Constitution of India? 13. Under the Finance Act, "Cleaning Activity" is defined as: " Cleaning activity" means cleaning, including specialised cleaning services such as disinfecting, extermin
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e freight revenue of railways is more than double of the activity of passenger revenue. It only shows that substantial railways is in commercial freight transport. Even, with reference to the status of the railway stations, we note that the same cannot be considered as non-commercial building or premises. The commercial nature of the railway stations and its premises is very apparent. Having examined the scope of activities of railways and the premises of railway stations we are of the opinion that the activities carried out by the appellant relating to mechanical cleaning of station, rail wagon, railway office is covered by the taxable entry- "cleaning activity" Thus, being a public utility by itself does not provide any immunity from service tax and service tax is leviable on cleaning services provided to Railways towards cleaning of railway station, railway shed or office premises of the general manager as Railways is a commercial organization. 15. S. No. 3 of Notification
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stitution of India under Article 243W and relate to the functions which are entrusted to the Municipality. 18. Paragraph 301 of Chapter III of Indian Railways Works Manual suggests that for sanitary arrangements in stations and colonies, the allocation of responsibilities lies with operating, medical and engineering departments. Thus, there is no entrustment and responsibility of Municipality towards cleaning of Railway premises/ properties. 19. Hence, in the light of above provisions, this office is of the view that railway station sanitation and/ or cleaning, train cleaning and Railway premises cleaning are not entrusted to Municipality and thus does not fall under the purview of S. No. 3 of Notification No. 9/2017 – Integrated Tax (Rate) dated 28.06.2017. 20. Conclusion: This office is of the view that services in question are not exempt from GST. Thus, the services provided by M/s VPSSR Facilities are taxable and will attract GST @ 18% under the Service Classification code Chapter
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The following entry has been inserted at S. No. 3A in the Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 by Notification No. 2/2018 – Central Tax (Rate) dated 25.01.2018; at S. No. 3A of Notification No. 09/2017 – Integrated Tax (Rate) dated 28.06.2017 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) 3A Chapter 99 Composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent. of the value of the said composite supply 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 entrusted to a Municipality under article
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public notification, specify to be an industrial township. 25. Hence, according to the Article 243Q of the Constitution of India, only Nagar Panchayats, Municipal Councils and Municipal Corporations are considered as Municipalities. However, in certain urban areas, called industrial townships, an industrial establishment may provide municipal services and a Municipality may not be constituted in that urban area. However, it appears that 'Railways' is not covered in Article 243Q either as a Municipality or as an industrial establishment for a notified industrial township in place of a Municipality. 26. The article 243W of the Constitution of India reads as under: 243W Powers, authority and responsibilities of Municipalities, etc. Subject to the provisions 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 cont
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ent. 7. Fire services 8. Urban forestry, protection of the environment and promotion of ecological aspects. 9. Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded. 10. Slum improvement and upgradation. 11. Urban poverty alleviation. 12. Provision of urban amenities and facilities such as parks, gardens, playgrounds. 13. Promotion of cultural, educational and aesthetic aspects. 14. Burials and burial grounds, cremation, cremation grounds and electric 15. Cattle 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 so
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ns of CGST and SGST, which covers Pure Services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government, Union Territory, local authority, Governmental authority or Government entity by way of any activity in relation to any function entrusted to a Municipality under Article 243W of the Constitution. 31. For 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
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arate payment made for the use of consumables. For the purpose of providing the service of cleaning, they were required to use soap/detergent/chemical of a very minimal quantity and of a very nominal value. The soap/detergent/chemical was used for removing the muck/ grime and the same got completely 'consumed' in the process and were 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, chemical
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al authority awarding the work of maintenance of street lights in a Municipal area to an agency which involves apart from maintenance, replacement of defunct lights and other spares. In this case, the scope of the service involves maintenance work and supply of goods, which falls under the works contract 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
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the function of the Railways is to transport goods and passengers which are excluded from exemption under S. No. 6(C) of Notification No. 9/2017 – Integrated Tax (Rate) dated 28.06.2017 and parallel Notifications of CGST and SGST. On the other hand, the functions of the 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 Tri
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Excise, Goa V/s Mormugao Municipal Council (MMC) that MMC, who was engaged in collecting rent contested payment of Service Tax and argued that certain markets were made by them as per their duty under the Constitution of India. They 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. T
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nservancy and solid waste management' functions of the Municipalities. The Municipalities are constitutionally entrusted with such functions in relation to urban areas but they are not entrusted with such functions in relation to Railway properties. 44. It is observed that Northern Railway has informed their sanitation contractors vide No. C-12/San/Misc/2017 dated 20.11.2017 that contracts for station sanitation would be exempt from GST, provided it is a pure service contract and no supply of goods are involved. Since, under Section 103 of the CGST Act, 2017, this ruling is binding only on the applicant and the jurisdictional officers, the Northern Railways is free to contest the same. However, the applicant is required to deposit GST as per this Ruling. Ruling 45. It is held that the cleaning services supplied by the applicant to the Northern Railways are not exempted under S. No. 3 of the Notification No. 09/2017 – Integrated Tax (Rate) dated 28.06.2017, as amended by Notificatio
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