GST Caselaw

#GSTCase-41-Supply of Cleaning and Sweeping Services for Building of Government Offices not Exempt from Levy of GST

#GSTCase-41-Supply of Cleaning and Sweeping Services for Building of Government Offices not Exempt from Levy of GST

 

NIS Management Ltd., [2019] 101 taxmann.com 476 (AAR-WEST BENGAL)

 

  1. Query:

 Whether supply of sweeping service to West Bengal Housing Board is exempt by virtue of Entry at S. No. 3 of Exemption Notification 12/2017- Central Tax (Rate) in terms of an activity in relation to any function entrusted to a Panchayat under Art 243G of the Constitution or to a Municipality under Art 243W of the Constitution.

 

  1. Facts

 Applicant provides services of deployment of personnel like a plumber, sweeper, security guard, electrician, carpenter etc. to the West Bengal Housing Board under the under the Housing Directorate of the Govt of West Bengal.

 

  1. Contention by the Applicant:

 Entry in question is at S.No. 3 of Notification No. 12/2017-Central Tax Rate Dated 28th June 2017 as amended time to time, which is as follows:

 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 entrusted to a Municipality under article 243W of the Constitution.

 

                                                                                                                                Emphasis Supplied

  1. Observation by AAR:
  • Meaning of Words “in Relation to” used in the relevant Entry: The phrase ‘in relation to any function’ refers not to what activities the recipient of the service is engaged in, but to what service the supplier is providing and whether that service falls under an activity listed under the Eleventh or the Twelfth Schedules.

 

  • Scope of Service: Housing Directorate invited quotation for deployment of personnel for several services, including ‘Sweeping Service’. The job description of a sweeper mentioned therein includes sweeping of the compound and common staircase and corridors of all floors of the buildings in the Housing Estate, cutting of jungles and bushes, cleaning and disposal of garbage, cleaning of the roof, surface drain cleaning, pit cleaning of sewerage system etc. It is, therefore, a bundle of activities that are classifiable under SAC 99853 as ‘cleaning service’.

 

  • Eligibility for Exemption: The above activity would be eligible for exemption provided it falls under the category of public health sanitation, being an activity under S. No. 7 (public health sanitation, conservancy and solid waste management) of the Twelfth Schedule to the Constitution.

 

‘Sanitation and similar services’ are classified under SAC 99945 (Seems that AAR arrived at the scope of sanitation services for Article 243W of Constitution of India from SAC 99945). It includes sweeping and cleaning, but only with reference cleaning of a road or street. Sweeping of premises – public or residential – is not classified under ‘Sanitation or similar service’.  Therefore, sweeping service provided by the applicant to the directorate cannot, therefore, be classified as an 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.

 

  1. Held:

 Sweeping Services supplied by the applicant to Housing Directorate of Government of West Bengal, cannot be classified as an 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. The exemption under Sl No. 3 or 3A, as the case may be, of Notification No 12/2017-CT (Rate) dated 28.06.2017 and WB Govt Gazette Notification-1136-FT dated 28.06.2017 is not, therefore, applicable to such supplies.

 

  1. Comment:

It is an interesting judgement not from the point of view of conclusion arrived by the AAR but how the AAR has arrived at the conclusion that cleaning services provided by the applicant cannot be classified as an 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.

 

a) Conclusion Arrived by AAR- Scope of the activities under “Public Health and Sanitation” for the purpose of Article 243W derived from SAC 99945

AAR has observed that activity of applicant would be eligible for exemption provided it falls under the category of public health sanitation, being an activity under Sl No. 7 (public health sanitation, conservancy and solid waste management) of the Twelfth Schedule to the Constitution.

However, for arriving at the scope of activities covered under “Public Health and Sanitation” under Article 243W of Constitution of India, reference was made to explanation given under SAC 99945. AAR held that since SAC 99945 for Sanitation and Similar Services only covers cleaning of a road or street and not sweeping of premises – public or residential, therefore activities of applicant do not fall under the ambit of Article 243W of Constitution of India.

In an alternate view, reference to SAC 99945 for arriving at the scope of term “Public Health and Sanitation” referred to in Article 243W of the Constitution of India may not be appropriate.

 

b) Scope of the activities under “Public Health and Sanitation”-West Bengal Municipal Corporation Act, 2006

As the term “public health and sanitation” has not been defined in Constitution and applicant is located in the State of West Bengal, therefore reference to the activities falling under “public health and sanitation” can be made from West Bengal municipal Corporation Act, 2006. Activities covered under public health and sanitation as per West Bengal Municipal Corporation Act, 2006 are as follows:

(2) in the sphere of public health and sanitation,-

(a) scavenging, removal and disposal of filth, rubbish and other obnoxious or polluted matters;

(b) reclamation of unhealthy localities, removal of noxious vegetation, and abatement of all nuisances;

(c) regulating and abating offensive and dangerous trades or practices;

(d) watering and cleansing of public streets and other public places;

(e) ensuring wholesomeness of water supplied for drinking and domestic purposes;

(f) regulation of places for the disposal of the dead, and provision and maintenance of places for the said purpose;

(g) measures for preventing and checking the spread of dangerous diseases;

(h) public vaccination and inoculation;

(i) removal and disposal of unclaimed dead bodies and carcasses of all dead animals;

(j) maintenance of all public tanks and regulating re-excavation, repair and up-keep of all private tanks, wells and other sources of water supply on such terms and conditions as the Mayor-in-Council may deem proper;

(k) conversion of all service privies into sanitary latrines and providing adequate facilities for sanitation so that open defecation may be completely done away with;

(l) disposal of solid and liquid wastes consistent with efforts to cause recovery and re-use of all that can be salvaged;

 

It can be observed that as per clause (d) above, watering and cleansing only of public streets and other public places falls under the purview of activities of Municipal Corporation under West Bengal Municipal Corporation Act, 2006. The term public places and public street has been defined under the West Bengal Municipal Corporation Act, 2006 as follows:

(80) “public place” means any place which is open to the use and enjoyment of the public, whether or not it is actually used or enjoyed by the public;

 (82) “public street” means any street, road, lane, gully, alley, passage, footpath, footway, pathway, square or courtyard, whether or not a thoroughfare, over which the public have a right of way, and includes –

(a) the access or approach to a public ferry,

(b) the roadway over any public bridge or causeway,

(c) the footway attached to any such street, public bridge, or causeway,

(d) the passage connecting two public streets, and

(e) the drain attached to any such street, public bridge, or causeway, and, where there is no drain attached to any such street, shall be deemed to include also, unless the contrary is shown, all lands up to the boundary wall, ail, hedge and pillar of the premises, if any, abutting on the street, or if a street alignment has been fixed, then, up to such alignment.

Further sub-clause (h) of Clause (4) of Section 97 provides that in the area of maintenance, responsibility would only be limited to maintenance and development of all properties vested in, or entrusted with, the management of the Corporation and properties which are not vested with the corporation does not fall in their purview.

Therefore, cleaning of offices of government does not fall under scope of functions of Local Authority as envisaged above on account of the fact that they are outside the ambit of cleaning of public streets and public places.

Once the activity falls out of the ambit of “public health and sanitation”, activity falls out of the ambit of the exemption of Entry at S. No. 3 of Exemption Notification 12/2017- Central Tax (Rate) in terms of an activity in relation to any function entrusted to a Panchayat under Art 243G of the Constitution or to a Municipality under Art 243W of the Constitution.

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