SERVICE TAX ON CLEANING SERVICES

[Dr. Sanjiv Agarwal]

Service tax has been imposed on cleaning services rendered to any person by any other person engaged in provision of such services by the Finance Act, 2005 with effect from 16th June, 2005 vide Notification No. 15/2005-ST, dated 7-6-2005. The gross amount charged to any person or total consideration received in relation to cleaning services or activities shall be chargeable to service tax.

Meaning of Cleaning Activity

Section 65(24b) defines 'cleaning activity' as under -

"Cleaning activity" means cleaning, including specialized cleaning service such as disinfecting, exterminating or sterilizing of objects or premises, of -

(i)   Commercial or industrial buildings and premises thereof; or

(ii)   Factory, plant or machinery, tank or reservoir of such commercial or industrial building and premises thereof, but does not include such services in relation to agriculture, horticulture, animal husbandry or dairying".

The definition suggests that cleaning activities should relate to cleaning and includes specialised cleaning activities. Thus, cleaning should satisfy the following conditions and includes-

(a)   cleaning activity itself

(b)   includes specialised cleaning service like -

(i)    disinfecting

(ii)    exterminating

(iii)   sterilizing etc.

(c)   specialised cleaning should be of objects or premises

(d)   subject matter of cleaning activities should be -

(i)    commercial or industrial buildings or their premises (both buildings as well as premises are covered) or

(ii)    factory, plant or machinery, tank or reservoir of such commercial or industrial buildings and premises

(e)   it includes only immovable property being commercial or industrial buildings or its premises and specified movable/immovable objects therein.

(f)    cleaning services does not include services rendered in relation to -

(i)    agriculture

(ii)    horticulture

(iii)   animal husbandry

(iv)   dairying

(g)   it excludes residential buildings or its premises and tank, reservoir etc situated therein.

Taxable Service

Section 65(105)(zzzd) defines taxable service as under -

'any service provided or to be provided to any person, by any other person, in relation to cleaning activity'.

For cleaning activities to be taxable, following conditions should be satisfied -

(a)   service should be provided to other person i.e., service should be undertaken on behalf of others

(b)   service may be any service in relation to cleaning activity

(c)   service should be rendered for a consideration

Cleaning activities in only commercial and industrial buildings or their premises shall be covered for taxability of cleaning services and cleaning of residential buildings and premises have been kept out of the service tax net.

Service Tax on Pay and Use Toilets

Vide Letter No. 356/45/2006-TRU dated 23.10.2006, it has been clarified by CBEC that the service to keep public toilets (owned by municipal bodies) in clean and hygienic condition for the users at nominal charges by Sulabh International Social Services Organisation (SISSO) does not attract service tax under management, maintenance or repair services or under cleaning services. Such activity does not fall under building, factory, plant and machinery

Exemption in respect of Exports

Cleaning services as specified in Notification No. 42/2007-ST dated 19.11.2007 have been exempted (refund allowed) in case of exporters under Notification No. 41/2007-ST dated 6.10.2007. Accordingly, following cleaning service received by an exporter and used for export of goods shall be exempt from levy of service tax subject to certain conditions and claim of refund as per prescribed procedure -

"Specialized cleaning services namely disinfecting, exterminating, sterilizing or fumigating of containers used for export of said goods provided to an exporter".

For claiming exemption exporter will have to comply with the following

conditions -

(i)    the exporter furnishes a copy of the written agreement entered into with the buyer of the said goods requiring such specialized cleaning of containers used for export of said goods; and

(ii)    the service provider is accredited by the competent statutory authority to provide such specialized cleaning services.

Notification No. 41/2007 has since been superseded by Notification No. 17/2009- ST dated 7.7.2009 and specialized cleaning services for containers used for export of goods provided to exporter shall be exempt for exporters.

Person Liable

Any person (including individuals) providing cleaning services or activities to any other person shall be liable to pay service tax and shall be treated as an assessee for service tax purposes.