The Delhi Authority for Advance Ruling recently held that the cleaning services provided to the Northern Railways are not exempted from Goods and Services Tax ( GST ).
The applicant, VPSSR Facilities, had been awarded a contract by the Northern Railway for providing services in relation to housekeeping, cleaning, sanitation, waste management, locomotives cleaning and washing. The Railways refused to pay GST to the applicant on the ground of exemption under S.No. 3 of the Notification No. 09/2017-Integrated Tax(Rate) dated 28.06.2017. As per this notification, services are exempt from GST only if services offered are: Pure Services without any supply of material & are in relation to any function entrusted to the Municipality as per Article 243W of the Constitution of India.
The issue sought for decision by the Authority for Advance Ruling (AAR) was whether the cleaning services provided to the Northern Railways are exempt under S.No. 3 of the Notification No. 09/2017-Integrated Tax(Rate) dated 28.06.2017 or not.
The Authority comprising Members Pankaj Jain & Vinay Kumar discussed 3 important questions before reaching a decision. The first issue was whether the service rendered by the applicant was “Pure Service”. The members found that the High Court had in the appellant’s own case held that the services rendered by the appellants were “Pure Services” as the goods used by the appellants for cleaning was completely consumed during the service and that property of such goods could be passed to the railways.
The second question for consideration was whether the Northern Railways – Service Receiver was covered under the ambit of Central Government. The members observed that the contracts by the Northern Railways to the applicant have been awarded in the name of the President of India and so officers subordinate to him while exercising the executive powers of the Union vested in the President and in the name of the President are also covered in “Central Government”.
The third issue to be considered was whether the cleaning services were in relation to any function entrusted to the Municipality as per Article 243W of the Constitution of India. The Authority noted that the functions of the Railways could not be related to that of the functions of a municipality.
As the services rendered by the applicant couldn’t satisfy the conditions laid down in the exemption notification, the Authority held that the applicant was liable to GST.