Services are exempt from GST only if services offered are pure services without any supply of material and are in relation to any function entrusted to Municipality as per article 243W of Constitution of India.
Facts: In the given case, the applicant is engaged in the business of executing service contracts 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 28-6-2017. 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.
Issue: Whether the cleaning services provided to the Northern Railways are exempt under Serial No. 3 of the Notification No. 09/2017-Integrated Tax (Rate) or not.
Held: The Railways cannot be called a Municipality under Articles 243P and 243Q of the Constitution of India. Further, the functions of Railways i.e., transport of goods or passengers are not covered in Schedule XII of the Constitution which covers the constitutional functions of Municipalities. The cleaning services supplied to Railways i.e., cleaning of locomotives, railway stations, railway lines provided by the applicant cannot be said to be covered in Clause (6) of Schedule XII of the Constitution which covers ‘public health, sanitation conservancy and solid waste management’ functions of the Municipalities. The Municipalities are constitutionally entrusted with such functions in relation to urban areas but they are not entrusted with such functions in relation to Railway properties.
It was held that the cleaning services supplied by the applicant to the Northern Railways are not exempted under S. No. 3 of the Notification No. 09/2017 – Integrated Tax (Rate), dated 28.06.2017. The applicant is required to deposit GST as per this Ruling.