GST on Educational Services and Entities
EDUCATION INSTITUTION
Educational Institution means an institution providing services by way
of:
1. Pre-school education and education up to higher
secondary school or equivalent;
Educational institutions up to Higher Secondary School level do not
suffer GST on output services and also on most of the important input services.
Some of the input services like canteen, repairs and maintenance etc. provided
by private players to educational institutions were subject to service tax in
pre-GST era and the same tax treatment has been continued in GST regime.
Thus output services of lodging/boarding in hostels provided by such
educational institutions which are providing pre-school education and education
up to higher secondary school or equivalent or education leading to a
qualification recognised by law, are fully exempt from GST. Annual
subscription/fees charged as lodging/boarding charges by such educational
institutions from its students for hostel accommodation shall therefore, not
attract GST.
2. Education as a part of a curriculum for obtaining a
qualification recognised by any law for the time being in force;
The term “Educational Institution”, sub-clause (ii) covers institutions
providing services by way of education as a part of curriculum for obtaining a
qualification recognised by any law for the time being in force. This is an
area where doubts have persisted as to what would be the meaning of “education
as part of curriculum for obtaining qualification recognised by law”. GST on
services being a legacy carried forward from the Service Tax regime, the explanation
given in the Education guide of 2012 can be gainfully referred to understand
the meaning of the term which reads as under;
It means that only such educational services are in the negative list as
are related to delivery of education as ‘a part’ of the curriculum that has
been prescribed for obtaining a qualification prescribed by law. It is
important to understand that to be in the negative list the service should be
delivered as part of curriculum. Conduct of degree courses by colleges,
universities or institutions which lead grant of qualifications recognized by
law would be covered. Training given by private coaching institutes would not
be covered as such training does not lead to grant of a recognized
qualification.
3. Education as a part of an approved vocational
education course
The term “Educational Institution”, sub-clause (iii) covers institutions
providing services by way of education as a part of approved vocational course,
and institutions providing the above courses will come within the ambit of the
term educational institution. Notification No. 12/2017- Central Tax (Rate)
dated 28th June, 2017, defines approved vocational education course as under:
An “approved vocational education course” means, –
(i) A course run by an industrial training institute or an industrial
training centre affiliated to the National Council for Vocational Training or
State Council for Vocational Training offering courses in designated trades
notified under the Apprentices Act, 1961 (52 of 1961); or
(ii) A Modular Employable Skill Course, approved by the National Council
of Vocational Training, run by a person registered with the Directorate General
of Training, Ministry of Skill Development and Entrepreneurship.
It is to be noted that only those institutions whose operations conform
to the specifics given in the definition of the term “Educational Institution”,
would be treated as one and entitled to avail exemptions provided by the law.
This would mean that private coaching centres or other unrecognized institutions,
though self-styled as educational institutions, would not be treated as
educational institutions under GST and thus cannot avail exemptions available
to an educational institution.
EXEMPTED SERVICES BY AND TO EDUCATION INSTITUTIONS
(including institutions run by Charitable trusts)
An entry 66 provides exemption for supply by and to “educational
institutions” and only the following services received by eligible educational
institution is exempt:
(1) Transportation of students, faculty and staff of the eligible
educational institution.
(2) Catering service including any mid-day meals scheme sponsored by the
Government.
(3) Security or cleaning or house-keeping services in such educational
institution.
(4) Services relating to admission to such institution or conduct of
examination.
Further Composite and Mixed Supply in so far as Education is concerned
Boarding schools provide service of education coupled with other services like
providing dwelling units for residence and food. This may be a case of bundled
services if the charges for education and lodging and boarding are inseparable.
Their taxability will be determined in terms of the principles laid down in
section 2(30) read with section 8 of the CGST Act, 2017.
Such services in the case of boarding schools are naturally bundled and
supplied in the ordinary course of business. Therefore, the bundle of services
will be treated as consisting entirely of the principal supply, which means the
service which forms the predominant element of such a bundle. In this case
since the predominant nature is determined by the service of education, the
other service of providing residential dwelling will not be considered for the
purpose of determining the tax liability and in this case the entire
consideration for the supply will be exempt.
Further educational activities provided by a trust or an institution
registered under sub clause (v) of clause (23C) of section 10 of the Income-tax
Act or a body or an authority covered under clause (23BBA) of section 10 of the
said Income-tax Act are also cover under the exemptions.
Charitable Trusts running institutions conforming to the definition of
Educational Institution as specified in the notification would be entitled to
the exemptions discussed above. Apart from the general exemption available to
all educational institutions, charitable activities of entities registered
under Section 12AA of the Income Tax Act is also exempt.
Provided that nothing contained in
entry (b) of this exemption shall apply to:
(i) renting of rooms where charges are one thousand rupees or more per
day;
(ii) renting of premises, community halls, kalian mandapam or open area,
and the like where charges are ten thousand rupees or more per day;
(iii) renting of shops or other spaces for business or commerce where
charges are ten thousand rupees or more per month.
TAXABLE SERVICES FOR EDUCATIONAL INSTITUTIONS
If such school or other educational institution gives property owned by
such institution on rent to others, no exemption will be available for such
services. Therefore, all services received by educational institutions managed
by charitable trusts (for other than charitable
Activities, as defined) except those services mentioned above are
taxable.
In case of a course in a college which leads to dual qualification only
one of which is recognized by law. Would service provided by the college by way
of such education be covered by the exemption notification? Provision of dual
qualifications is in the nature of two separate services as the curriculum and
fees for each of such qualifications are prescribed separately. Service in
respect of each qualification would, therefore, be assessed separately.
If an artificial bundle of service is created by clubbing two courses
together, only one of which leads to a qualification recognized by law, then by
application of the rule of determination of taxability of a supply which is not
bundled in the ordinary course of business, it shall be treated as a mixed
supply as per provisions contained in section
2(74) read with section 8 of the CGST Act, 2017. The taxability will be
determined by the supply which attracts highest rate of GST.
However incidental auxiliary courses provided by way of hobby classes or
extracurricular activities in furtherance of overall well-being will be an
example of naturally bundled course, and therefore treated as composite supply.
One relevant consideration in such cases will be the amount of extra billing
being done for the unrecognized component viz-a-viz the recognized course. If
extra billing is being done, it may be a case of artificial bundling of two
different supplies, not supplied together in the ordinary course of business,
and therefore will be treated as a mixed supply, attracting the rate of the
higher taxed component for the entire consideration.
The Education guide of 2012 for the purpose of service tax has given the
following important clarifications in respect of educational services. The same
can be gainfully referred to, for the purpose of clarity under the GST regime:
“The supply of placement services provided to educational institutions
for securing job placements for the students shall be liable to service tax.
Similarly, educational institutes such as IITs, IIMs charge a fee from
prospective employers like corporate houses/ MNCs, who come to the institutes
for recruiting candidates through campus interviews in relation to campus
recruitments. Such services shall also be liable to service tax.”
The indicative list of taxable services could be renting of premises by
such entities, grant of sponsorship and advertising rights during conduct of
events/functions etc. Thus, there could be many services provided by
educational institution which are not considered as educational activities and
hence, such services come under the GST net.
CONCLUSION
Education is fundamental to the nation building process. Right to
Education is now a fundamental right of every child in India. GST Law
recognises this and provides exemption to educational institutions, providing
education up to higher secondary school or equivalent from the levy of GST. So,
services provided by an educational institution to students, faculty and staff
are exempt. The output services of lodging/boarding in hostels provided are
fully exempt from GST. Auxiliary services received by such educational
institutions for the purpose of education up to Higher Secondary level is also
exempt from GST. Other services related to education, not covered by the
exemption, would be taxed at a standard rate of 18% with full admissibility of
ITC for such taxable services in cases where the output service is not exempt.
Conduct of degree courses by colleges, universities or institutions
which lead grant of qualifications recognized by law would be exempted from
GST. The output services of lodging/boarding in hostels provided by such
educational institutions which are providing education leading to a
qualification recognised by law, are fully exempt from GST. Auxiliary education
services entry no 66 of notification no. 12, if provided to educational
institutions providing degree or higher education, the same would not be exempt
from GST. The supply of placement services provided to educational institutions
for securing job placements for the students shall be liable to GST. Educational
institutes such as IITs, IIMs charge a fee from prospective employers like
corporate houses/ MNCs, who come to the institutes for recruiting candidates
through campus interviews in relation to campus recruitments. Such services
shall also be liable to GST.
Training given by private coaching institutes or other unrecognised
institution or self-styled educational institution would not be exempted as
such training does not lead to grant of a recognized Degree and also Services
provided by way of education as a part of a prescribed curriculum for obtaining
a qualification recognized by a law of a foreign country are also not exempted
because the course / degree not recognized by Indian Law.
Source | https://taxguru.in/
Regards
Prof. Pralhad Jadhav
Master of Library & Information Science (NET
Qualified)
Senior Manager @ Knowledge Repository
Khaitan & Co
Twitter Handle | @Pralhad161978
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