JANUARY 27, 2020

By CA Pritam Mahure

WASTE is a matter of concern for modern societies. Households generate wastes so does industries. Further, medical waste is generated at hospitals, clinical establishments, medical or laboratories etc.

Typically, Waste Treatment or Disposal Sites (hereunder referred as 'WTDS') are engaged in scientifically managing and treating the waste including the bio-medical waste (generated at hospitals or clinics). By treating/destroying the waste scientifically, WTDS entities play a crucial role in maintaining environment.

Bio-medical waste

Bio-Medical waste is considered as hazardous for humans/animals as well as environment as it could contain used drugs, chemicals, radioactive materials etc.

Exemption for bio-medical waste treatment facility

From GST perspective, to minimise the costs to service recipients, an exemption from GST is provided under Sr. no. 75 of Not. No. 12/2017-CT(R) as "Services provided by operators of the common bio-medical waste treatment facility to a clinical establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto". It can be observed that the entry provides for exemption on services provided 'by' WTDS entities.

Challenges for bio-medical waste treatment facility

However, clarity on services provided 'to' various WTDS entities has become an area of concern. It is pertinent to note that the majority of the procurements of WTDS entities is manpower/contractual labour supply, consultancy services (including scientist, engineers etc), renting of equipment etc.

All the aforesaid expenses attract GST @ 18%. Additionally, levy of GST under reverse charge mechanism like transportation of waste, advisory services from non-resident scientist etc. further adds to the burden.

Similar exemption exists when services procured by Local Authorities

It is pertinent to note that in case a Local Authority or Panchayat etc procures services (similar to all the services procured by WTDS entities) then the same is entitled for exemption as per sr. no. 3 of Not. No. 12/2017-CT(R) which reads as " Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or [a Government entity] by way of any activity 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".

It may be noted that the function of public health is entrusted to Municipal Corporations or Panchayats. Across India, bio-medical waste treatment being a specialised activity, the same is outsourced to WTDS entities by the Local Authorities/Panchayats etc.

Ideally, irrespective of the fact whether these functions are managed by private entities or local authorities, as the nature of activity remains same (i.e. waste disposal), it should not lead to increase in cost of operation.

Given the aforesaid, whether when the Local Authorities or Panchayats procures the input services or other WTDS entities, exemption could be made available as the exemption should be qua the 'service' than qua the 'person'.

Way forward

One may not ignore the fact that globally, in view of the rising environmental concerns, substantial incentives are given to the entities engaged in waste management and environment safety.

Thus, the GST Council must ensure reduction in cost of operation of such entities through clarification/exemption on the key procurements of WTDS entities [say similar to the exemption to specified procurement made available to schools vide sr. no. 66 of Not. No. Notification 12/2017-CT(R) ].

Given this, as WTDS entities are supporting the Local Authorities or Panchayats, clarity about the exemption on their procurements will really be in interest of 'public' as well as the 'Swachh Bharat Abhiyan' launched by the government.

(The article is co-authored by CA Vaishali Kharde, Associate Director at Pritam Mahure and Associates. The views expressed are strictly personal.)