2025 (7) TMI 52 - AAAR - GST

Exemption from GST - Services provided to the school students by way of transportation of students and staff - services provided to school (Educational Institute) or not - applicability of Serial No.66 of N/N. 12/2017-Central Tax (Rate) dated 28th June 2017 or any other applicable provision of the Act - HELD THAT - In the instant case it is not in dispute that the appellant is under contractual obligation to all the schools for providing the transportation services to the students and staff. However the service is supplied only by the appellant in the form of transportation service and not the educational institution. Such supply of transportation service is utilised by the students and staff. The consideration for using the transportation services is paid by the parents of the students. Here in the scheme of things nowhere the educational institution comes into play during the course of supplying and receiving the said transportation services but for the statutory rules and instructions to be followed by the school bus operator which was already laid down by the Government of Tamilnadu. The documents furnished by the appellant in respect of APL Global School and Aplhabet School were dated only recently i.e 26-05-2025 and 20-05-2025 respectively. Though lease agreement with KC High school for seventeen buses was entered in 2023 all the above agreements entered with the school is general in nature and in all the agreements the educational institution has neither committed to provide service to students and staff nor receive any services from the appellant. All the agreements specifically directs the appellant to render transportation service to students and staff and that the service provider namely the appellant shall collects the transport fees directly from the parents of students utilising the transportation service - the role of school in the above transaction is effectively ruled out as the school is neither rendering any service nor receiving any service in view of the reasons discussed above. Therefore the services provided by the appellant by way of transportation of students and staff shall not be considered as the services provided to the school. The Government is facilitating the educational institutions by giving reliefs and exemptions in the form of road tax income tax GST etc. who are providing the noble service of imparting education and hence the exemption notification provided by the Government should be properly availed by the entity entitled to claim. Applicability of exemption to the transport service supplied by the appellant - HELD THAT - The appellant who is supplier of service has the burden to prove the availability of exemption and need to establish the same to the authorities. It was held by various courts that an exemption notification should be interpreted strictly and the burden of proving its applicability would be on the person who claims and he has to show that his case comes within the parameters of the exemption clause or exemption notification. The service of transportation here is neither provided by an educational institution nor is provided to the educational institution. Therefore SI. No.66 of Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017 as amended is not available to the appellant under the facts and circumstances of the instant case. Accordingly the question is answered in negative. From the facts on record it could be seen that the said applicant had not furnished any documents to the Advance Ruling Authority while filing the application. They have neither owned any vehicles nor have entered into any contractual agreements with the educational institutions. The ruling by the then AAR was pronounced only based on the facts stated by the applicant. Therefore the decision referred by the applicant is not identical or similar and shall not be compared to the case on hand. Further in terms of Section 103(1) of the Act the Advance ruling pronounced by the Authority or the Appellate Authority under this Chapter shall be binding only (a) on the applicant who had sought it in respect of any matter referred to in sub-section (2) of Section 97and (b) on the concerned officer or the jurisdictional officer in respect of the applicant. Hence the decision of Advance ruling authority is not binding on this Appellate Authority for Advance ruling.

Summary

The core legal questions considered by the Appellate Authority for Advance Ruling (AAAR) in this matter are:

1. Whether the transportation services provided to school students and staff by the appellant qualify as services provided to the educational institution under the relevant GST exemption notification.

2. Whether such transportation services are exempt from Goods and Services Tax (GST) under Serial No. 66 of Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017 or any other applicable provision of the GST Act.

3. The proper identification of the recipient of the service for GST purposes-whether it is the educational institution or the students/staff (or their parents) who pay for the service.

4. The applicability and binding nature of prior Advance Ruling decisions and the scope of Section 103(1) and (2) of the GST Act in relation to the present case.

5. The interpretation of exemption notifications and the burden of proof on the appellant claiming exemption.

Issue-wise Detailed Analysis:

Issue 1: Whether the transportation services provided are services to the educational institution

The relevant legal framework includes Section 2(102) defining 'services', Section 2(105) defining 'supplier', Section 2(93) defining 'recipient', and Serial No. 66 of Notification No. 12/2017-Central Tax (Rate) which exempts services provided by or to educational institutions by way of transportation of students, faculty, and staff.

The Court interpreted 'services' broadly as any commercial activity other than supply of goods, for consideration. The appellant is clearly the supplier of transportation services for consideration.

Regarding the 'recipient', the law distinguishes between the person to whom the service is rendered and the person liable to pay for the service. Where consideration is involved, the person liable to pay is deemed the recipient. Here, the parents of the students pay the transportation fees directly to the appellant, not the school.

The appellant argued that the service is effectively provided to the school because the school regulates, supervises, and controls the transport service, and the payments by parents are made on the school's instruction. However, the Court found that the school neither receives nor pays for the service; the contracts are between the appellant and the parents or students, with the school playing no direct role as service recipient.

Agreements submitted by the appellant were general and did not establish the school as recipient or payer of the service. The transportation permits issued in the school's name were held to be a regulatory requirement and not determinative of service recipient status.

The Court applied the definitions strictly and concluded that the recipient of the service is the parents/students, not the educational institution.

Issue 2: Whether the transportation services are exempt from GST under Notification No. 12/2017-Central Tax (Rate)

The exemption notification at Serial No. 66 provides GST exemption only for services provided (a) by an educational institution to its students, faculty, and staff, or (b) to an educational institution by way of transportation of students, faculty, and staff.

The Court emphasized the strict and unambiguous interpretation required for exemption notifications, holding that the exemption applies only if the service is provided by or to an educational institution.

Since the appellant is neither an educational institution nor providing services to an educational institution (the recipient is parents/students), the exemption does not apply.

The appellant's reliance on a prior Advance Ruling that granted exemption for similar outsourced transport services was distinguished on facts: the prior case lacked contracts or ownership of vehicles, and the ruling was based solely on facts stated by that applicant. The Court held that such ruling was not binding on the present authority and not factually analogous.

Issue 3: Identification of service recipient and consideration

The Court analyzed the definitions under the GST Act and found that the recipient is the person liable to pay consideration for the service. Here, the parents pay the transportation fees directly to the appellant, making them the recipients for GST purposes.

The appellant's argument that the school controls and supervises the service and therefore should be treated as recipient was rejected because the school neither pays nor receives the service contractually.

Issue 4: Binding nature of prior Advance Rulings and applicability of Section 103(1) and (2)

The Court noted that under Section 103(1), Advance Rulings bind only the applicant and the jurisdictional officer in respect of that applicant. Section 103(2) provides that the ruling is binding unless the law, facts, or circumstances change.

The prior Advance Ruling cited by the appellant was not binding on the present authority and was factually distinguishable. The Court thus declined to follow it.

Issue 5: Burden of proof and interpretation of exemption notifications

The Court reiterated the well-established principle that exemption notifications must be strictly construed and the burden of proving entitlement to exemption lies on the claimant.

The appellant failed to establish that the service was provided by or to an educational institution within the meaning of the exemption notification.

Significant Holdings:

"The recipient of supply of goods or services is the person who is liable to pay the consideration where consideration is involved."

"Services provided by way of transportation of students and staff are exempt from GST only if such services are provided by an educational institution or to an educational institution."

"The mere fact that the transportation permit is issued in the name of the educational institution or that the school supervises the transportation does not make the school the recipient of the service."

"Exemption notifications are to be interpreted strictly and the burden of proving entitlement to exemption lies on the person claiming it."

"Advance Rulings are binding only on the applicant and the jurisdictional officer in respect of that applicant and are not binding on other parties or authorities."

Final determinations:

1. The transportation services provided by the appellant to students and staff are not services provided to the educational institution within the meaning of the exemption notification.

2. The services provided by the appellant are taxable and not exempt under Serial No. 66 of Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017 or any other provision of the GST Act.

3. The Advance Ruling passed by the Authority for Advance Ruling is upheld, and the appeal is dismissed.