GST Caselaw

#GSTCase-42-Supply of Security and Scavenging Services to Medical Colleges and Government Hospital is not exempt from levy of Tax

#GSTCase-42-Supply of Security and Scavenging Services to Medical Colleges and Government Hospital is not exempt from levy of Tax

 

Ex-Servicemen Resettlement Society,[2019] 101 taxmann.com 477 (AAR-WEST BENGAL)

 

  1. Query:

 Whether supply of Security and Scavenging service to Medical Colleges and Government Hospitals 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 is supplying Security Guards to Medical colleges and Hospitals of West Bengal and Central Govt. Cancer Institute. In addition to the Security Guard, applicant also supplies Scavenging/Karmabandhu/Menial Personnel performing following activities:

  • Manual cleaning where required;
  • Duties of attendants viz. bringing of Medicine/Oxygen Cylinders from a particular store to different wards;
  • Operating trolleys for the carriage of patients from the Emergency Ward to different wards, or from the Wards to the different laboratories for different tests, like blood tests, x-rays, scans, etc.

 

  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.

 

  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.

 

  • What is Pure Service: Pure service is not defined in the GST Act. However, it appears from the context that services involving no supply of goods are considered as pure service. Since, applicant is not supplying any goods while provisioning the services therefore, services provided by the supplier are classifiable as pure service.

 

  • Recipient of Service being Government or Governmental Authority: The supplies have been made to hospitals owned or managed by the government. It is, therefore, obvious that the recipient is government or governmental authority etc.

 

  • Eligibility of Exemption for Security Services: “Security Services” provided to Government Hospitals and Medical Colleges, as institutions of Central/State/District/Local authorities, are not covered under Article 243G and Article 243W of the Constitution of India.

 

  • Eligibility of Exemption for Scavenging Services: Services provided by the applicant would be eligible for exemption provided they fall in following entries:

Article 243G under Serial No 26 covers “Health and sanitation, including hospitals, primary health centres and dispensaries” and Article 243W under Serial No 7 covers “Public health sanitation, conservancy and solid waste management”.

For the meaning of ‘Health’ and ‘Sanitation’ for the purpose of Article 243G and Article 243W of Constitution of India, AAR referred to meaning of such terms provided under Notification No. 12/2017-Central Tax (Rate).

AAR then observed that ‘Health Care Service’ classified under SAC 99931 has been defined under clause 2(zg) of Notification No. 12/2017-Central Tax (Rate) to mean any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicine in India and includes services by way of transportation of patient to and from a clinical establishment. It is classified under SAC 99931.

It does not include any of the services the Applicant bundled under the description ‘Scavenging Services’.

Further ‘Sanitation and similar services’ classified under SAC 99945 although includes sweeping and cleaning, but only with reference cleaning of a road or street. Cleaning of hospital premises is not, therefore, classified under ‘Sanitation or similar service’.

The services the Applicant bundled under the description ‘Scavenging Services’ are, therefore, not exempt under Sl No. 3 of the Exemption Notification.

 

  1. Held

Security and Scavenging Services supplied by the applicant to Government Hospitals 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 S. No. 3, 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:

 Following its judgement in NIS Management Ltd., [2019] 101 taxmann.com 476 (AAR-WEST BENGAL), AAR West Bengal again derived meaning of Health and Sanitation for the purpose of Article 243G and 243W from meaning given to them in Notification No. 12/2017-Central Tax (Rate). On the basis of meaning given to these terms in the Exemption Notification, AAR arrived at the conclusion that Security and Scavenging 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.

 Although the conclusion would not have changed in this case, but on a broader scenario what Entry at S. No. 3 in Exemption notification 12/2017-Central Tax (Rate) seeks to achieve is exemption from levy of tax on Supply of pure services 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; even though these services when otherwise provided might be taxable or exempted under GST Regime through separate entries in Notification No. 11/2017-Central Tax (Rate) and 12/2017-Central Tax (Rate). Therefore, meaning of activities provided under Article 243W and 243G have to be taken specifically in the context in which they have been incorporated in the Constitution of India rather than the exemption notification, otherwise the purpose of the entry would be defeated.

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