2020 (3) TMI 296 - AAR - GST

Admissibility of Advance Ruling application - Classification of services - services provided by Padmavathi Hospitality Facilities Management Services (PHFMS) to DME - whether classifiable as a function entrusted to a Panchayat or a Municipality under the constitution? - availability of exemption under Sl.No.3 of Notification 12/2017 Central Tax dated 28.06.2017 read along with amendment dated 25.01.2018 - Services provided by PHFMS to DME including institutions of Government Hospitals and colleges - levy of GST - Rate of GST - Pure services or Composite Supplies? HELD THAT - It is seen from the writ petition filed by the applicant that the applicant has submitted before the Hon ble High Court that KRYSTAL, a bidder to the said tender has submitted their bid by stating GST as Zero and emerged as the successful bidder in respect of Zone 1 to Zone 4 and that the applicant would have been the successful bidder after including GST and that KRYSTAL had taken a calculated risk in submitting their bid without GST. The applicant had also made a representation to TNMSCL dt 11.7.2019 stating that price quoted by KRYSTAL without GST is to be disqualified as GST is applicable to the services involved in the tender. To this, TNMSCL vide letter dt 14.8.2019 had replied that GST is not applicable as per Notification No 12/2017 dt 28.6.2017 and hence, KRYSTAL is the LI for Zone 1 to 4 as they had the lowest bid with zero GST. In the writ petition, the applicant has repeatedly stressed that KRYSTAL has made the successful bid only because they quoted zero GST whereas in reality GST is chargeable for the services covered in the tender. With GST added, the applicant would have been the lowest bidder for zone 1 to 4 and they would not have been asked to lower their bid for zone 5 without including GST. The applicant himself has stated in the writ petition and in the communication with TNMSCL that the applicability of GST is essential to be decided before the tender is finalized. The stand of the applicant that the issue of applicability of GST is not the issue in the writ petition is not correct. The decision of the Hon ble High Court on the writ will be applicable on the GST authorities who are also the respondents in the writ. This Authority functions within the limitations prescribed under Section 97 and 98 of the GST Act 2017. In as much as the State/Center Jurisdiction authorities are respondents to the Petition before Hon ble High Court and the subject matter revolves on the leviability of GST, we find that the application cannot be admitted as per Proviso to Section 98(2), of the CGST /TNGST ACT as the question raised is already pending in the Hon ble Madras High Court. The application filed by M/s. Padmavathi Hospitality Facilities Management Service is rejected under Proviso to Section 98(2).

Summary

Issues Involved:
1. Classification of services provided by PHFMS to DME.
2. Applicability of exemption under Sl.No.3 of Notification 12/2017.
3. GST liability and applicable rate for services provided by PHFMS to DME.
4. Classification of services as pure services or composite supplies.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by PHFMS to DME:
The applicant, PHFMS, provides housekeeping, pest control, and security services to the Directorate of Medical Education (DME), which oversees Government Medical College Hospitals, Government Medical Colleges, and Government Nursing Colleges. The applicant sought clarification on whether these services are classifiable as functions entrusted to a Panchayat or a Municipality under the Constitution. The applicant argued that their services do not fall under the categories specified in Articles 243G and 243W of the Indian Constitution, which list the functions entrusted to Panchayats and Municipalities, respectively. Consequently, the applicant concluded that no GST exemption is available for these services.

2. Applicability of Exemption Under Sl.No.3 of Notification 12/2017:
The applicant referenced Notification 12/2017 Central Tax (Rate) dated 28.06.2017, which exempts services provided to the government by way of any activity related to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W. The applicant contended that their services do not qualify for this exemption as they do not fall under the specified functions. The jurisdictional authority also supported this view, stating that the services provided by PHFMS involve both manpower and goods, and thus do not qualify as pure services under the exemption.

3. GST Liability and Applicable Rate for Services Provided by PHFMS to DME:
The applicant sought clarification on whether the services provided to DME, including institutions of Government Hospitals and Colleges, are liable for GST and the applicable rate. The jurisdictional authority confirmed that the services are taxable at the rate of 18% for both security and cleaning services. The applicant had been collecting and paying GST at this rate since the inception of GST on 01.07.2017.

4. Classification of Services as Pure Services or Composite Supplies:
The applicant argued that their services should be classified as pure services, which would potentially qualify for exemption under Notification 12/2017. However, the jurisdictional authority clarified that the services provided by PHFMS involve both manpower and goods, and therefore do not qualify as pure services. The authority further stated that the services do not match the description of pure services as defined under the GST Act or the relevant notification.

Ruling:
The application filed by PHFMS was rejected under Proviso to Section 98(2) of the CGST/TNGST Act as the question raised was already pending in the Hon'ble Madras High Court. The court had allowed the Advance Ruling Authority to decide on the application despite the pending writ petition. However, the authority found that the issue of GST applicability was central to the writ petition, and thus, the application could not be admitted.