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September 11, 2021

Housekeeping, Security & Other services to Government Hospitals exempt under GST

by Mahesh Mara in Income Tax

Housekeeping Security & Other services to Government Hospitals exempt under GST

Fact and Issue of the case

M/s. Padmavathi Hospitality & Facilities Management Services, New No.51, Old No.117, JVL Towers, 2nd Floor, Nelson Manickam Road, Aminjakarai, Chennai-600029 (hereinafter referred as ‘Applicant’ or `PHFMS’) is registered under the GST Act 2017 vide GSTIN No. 33AAIFP7751M1ZR. The applicant is engaged in providing Mechanized and Manual Housekeeping services/Cleaning services including Pest Control services; Security services, non-medical Man Power supply to support Medical and paramedical services in hospital projects; Bio Waste Management for all Hospitals under DME as bundled services to Directorate of Medical Education (DME) that includes Government Medical College Hospitals, Government Medical Colleges and Government Nursing Colleges. The applicant has sought Advance Ruling on the following questions:

1. Whether services provided by Padmavathi Hospitality & Facilities Management Services (PHFMS) to DME are classifiable as a function entrusted to a Panchayat or a Municipality under the constitution? If not then can we conclude that no exemption is available to PHFMS?

2. Whether services provided by PHFMS to DME is exempted under Sl.No.3 of Notification 12/2017 Central Tax dated 28.06.2017 read along with amendment dated 25.01.2018?

3. Whether Services provided by PHFMS to DME including institutions of Government Hospitals and colleges are liable for GST or not? If yes, what is the rate of GST applicable to these services

4. Whether services rendered by PHFMS to DME can be classified as pure services or Composite Supplies?

The applicant submitted a copy of challan evidencing payment of application fees of Rs.5, 000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017.

Observation of the Authority

In the case under discussion, it is observed that the proposed supply is Comprehensive Facility management services’, which includes extending suitable man power for various activities in the hospitals under DM&RHS such as Housekeeping, Cleaning, Security Services and Assistance in Electrical, Plumbing, laundering, Cooking, Catering, Gardening & Carpentry Services and undertaking such services with the required essential consumables, goods and equipment. The `Scope of Work’ as seen from the portion of the tender bid furnished before us envisages receipt of service of housekeeping, cleaning including Bio medical disposal & pest Control, Security services, maintenance of the Hospitals by assisting in electrical, plumbing, etc. Thus, in the case at hand, the scope of work is the supply of Comprehensive facility management service for the upkeep/running of the hospitals, i.e., the successful bidder uses the materials required for provision of such services and the various services are supplied to the recipient by such successful bidder. Hence, the recipient is supplied with ‘Pure services’ of Housekeeping/ cleaning including Pest Control services; Security services; manpower for various maintenance services. The first limb of the said notification specifies ‘Pure Services (excluding works contract service or other composite supplies involving supply of any goods)’, in the instant case, the services provided are ‘Pure Services’ and the said entry covers all the ‘Pure services’, therefore, this limb is fulfilled.

The webpage https://tnhealth.tn.gov.in/tngovin/orgnstructure.php, gives the Organisational structure of Ministry of Health and Family Welfare, Tamil Nadu and DM&RHS is listed as a Directorate under the said Ministry.

Further, the webpage https: / /health.tn.gov.inItngovinidms/dms.php states the evolution of public health systems in Tamil Nadu and function & role of institutions involved. For better understanding extracted as below:

  • “The object of hospital services organised in India during the early years of British rule was to cater mainly to the needs of the British army and the British Civilian population. Indian Medical Department was organised on a regular basis in 1786.
  • In 1922 Public Health and Medical Services were separated at all levels.
  • In the year 1875 a Medical Rule was set up and Department of Sanitation and Vaccination was brought under the Control of Medical Department. The Medical Department was then headed by Surgeon General.
  • In 1919 the post of Director of Public Health has been created and the department has been bifurcated.
  • The Public Health Department was formed in the year 1923 for the prevention and control of communicable diseases and for the improvement of General Health Conditions in the State.
  • After the year 1947 the post of Surgeon General who was fully in charge of Indian Medical Department was re-designated as Director of Medical Services for Madras State.
  • The ESI Scheme was framed in according with the provision of the ESI act 1948 and was first inaugurated in Tamil Nadu in 1955.
  • In 1956 Family Welfare Programme was taken up by this Department to promote the Health of the People particularly Mothers and Children.
  • In 1966 a new department was created to attend Medical Education.
  • In the Year 1970 the Directorate of Indian Medicine was formed which was under the control of Director of Medical Services.
  • During 1982 the Drug Control Administration has become an independent Department.
  • During 1983 the Directorate of Family Welfare was disintegrated from the Directorate of Medical Services and Family Welfare for better co-ordination and implementation of Family Welfare Programme
  • In the year 1999 the Directorate of Medical Services was bifurcated and a separate Directorate to look after the implementation of the ESI Scheme was formed on 1.1.1999
  • time of inception has decade by decade paved way for organisation of various separate Departments for better administration and from 1.1.99 onwards, this Department namely the Department of Medical and Rural Health Services is being entrusted with the responsibility of rendering Medical Care services to the public through the Non-Teaching Medical Institutions.”

In view of the above said position, it is clearly evident that Directorate of Medical & Rural Health Services, and Directorate Medical & Rural Health Services (ESI) are Directorates under Health & Family welfare Department, Government of Tamil Nadu. In the case at hand, the tender issuing and accepting authority, alone is the TNMSC. The role of the Tamil Nadu Medical Service Corporation Ltd., (TNMSC), a Government of Tamil Nadu Undertaking is to be understood in the backdrop of the tender offer document of Tamil Nadu Medical Services Corporation Bid Reference 697/Outsourcing/DMS/TNMSC/ENGG/2021 dt 05.07.2021. The Tamil Nadu Medical Service Corporation Ltd., (TNMSC) was set up with the primary objective of ensuring ready availability of all essential drugs and medicines in the Government Medical Institutions throughout the State by adopting a streamlined procedure for their procurement, storage and distribution was incorporated under the Companies Act, 1956. A discussed above, upon perusing the tender document Clause 2.1.2 of the Interpretation of Terminologies in Part II – Conditions of Contract role of Tamil Nadu Medical services Corporation is specified as The Tender inviting authority and Tender Accepting Authority and they act as facilitator and the actual contract is between the Directorate of Medical & Rural Health Services, and Directorate Medical & Rural Health Services (ESI) and the successful bidder only and the services are to be provided to Directorate of Medical & Rural Health Services, and Directorate Medical & Rural Health Services (ESI). In view of the above discussion it is clear that DMS &MS(ESI) are State Government Department and the successful bidder makes the supply to the State Government, the identified class under the said entry and second limb of the said Notification is fulfilled.

The final limb of Entry No.3 Chapter 99 of Notification No.12/2017-C.T.(Rate) dated 28.06.2017 which is to be examined is whether the activities are 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 scope of work proposed in the tender is ‘comprehensive facility management services’ of the Hospitals under DM & RHS. Under article 243G of the Constitution, activities in relation to any function entrusted to Panchayat is clearly listed out in the Eleventh schedule and Serial No.23 covers ‘Health and sanitation, including hospitals, primary health centers and dispensaries’; under Article 243W of the Constitution, activities in relation to any function entrusted to the Municipality is listed in the Twelfth Schedule and Entry No.No. 6 covers `Public Health’. Public Health and hospitals being State subject, State Governments are primarily responsible for up-keeping of the hospitals and any services rendered for up keeping of the hospitals, are done 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. In the case at hand, the tender is called for to provide ‘Comprehensive facility management services’ and in view of the above discussion, it is clear that third limb of said entry of the exemption notification is also satisfied.

To summarize, the scope of work in the tender document as furnished to us is ‘Comprehensive facility management services’ which are ‘Pure Services’ of House – keeping, cleaning including pest control services, Security services, assistance in the form of Electrician, Plumber, etc for effective maintenance of the hospital facility; the supply is proposed for the hospitals under DM&RHS, which is a Directorate under Ministry of Health & Family Welfare, State of Tamil Nadu, i.e., State Government; the activities being in relation to the up-keeping/running of the Hospital facility, is in relation to the activities entrusted to a Panchayat or a Municipality under Article 243G/W of the Constitution and therefore, the exemption at Entry No. 3 of Notification no. 12/2017-C.T.(Rate) dated 28.06.2017 as amended is applicable in respect of the scope of work tendered by TNMSC for the supply to be made to hospitals under DMS.

The applicant has stated that they are rendering similar services in the State of Andhra Pradesh and has furnished the Tender document, agreement and sample invoices. On perusal, it is seen that in the said case, the Tender is for ‘Providing Sanitation Services for the Hospitals and Medical/nursing colleges in DME Institutions in Chittoor, Kadapa, Anantapur, Kurnool Districts in the State of Andhra Pradesh. It is evident that in this case the supply is made not only to the Hospitals but also to the educational institutions and the facts in this count are not similar to that in the case at hand, wherein the supply tendered is towards `Comprehensive facility management’ of the Hospital facility only, which is to be maintained by the State Government as per the dictum of the Constitution under Article 243G/243W.

Conclusion

1. The proposed supply as per the Tender for housekeeping, Security Services and Assistance in Electrical, Plumbing, laundering, Cooking, Catering, Gardening & Carpentry Services in 93 Government Hospitals under the Control of Directorate of Medical & Rural Health Services, -86 Institutions, Directorate Medical & Rural Health Services (ESI)-7 Institutions is exempt under Entry No. 3 of Notification No.12/2017-C.T.(Rate) dated 28.06.2017 read with Entry No. 3 of Notification No.II(2)/CTR/532(d-14)/2017 vide G.O. (Ms) No. 73 dated 29.06.2017 as brought out in para 8 above.

2. The applicant’s question on the supply tendered for Medical Hospitals, Medical Colleges and Nursing Colleges under Directorate of Medical Education (DME) is not answered as not admitted, under sub-section (2) of Section 98 of the CGST Act and TNGST Act read with Section 95(a) of the CGST/TNGST Act 2017.

Read the full order from below

Housekeeping-Security-Other-services-to-Government-Hospitals-exempt-under-GST

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