Vide Notification No.25/2012-ST, dated 20.06.2012 the Central Government exemptions to education services from the whole of the service tax leviable under Section 66B of the Finance Act, 1994. Item No. 9 of the said mega Notification provides that the services to or by an educational institution in respect of education exempted from service tax by way of-
- Auxiliary education services; or
- Renting of immoveable property.
The term ‘auxiliary education services’ is defined the Notification itself. The following services will come under the ‘auxiliary education services’:
- Any services relating to imparting any skill knowledge or education; or
- Development of course content; or
- Any other knowledge – enhancement activity, whether for the students or the faculty; or
- Any other services which education institutions ordinarily carry out themselves but may obtain as outsourced services from any other person, including following services relating to-
- Admission to such institutions;
- Conduct of examination;
- Catering for the students under any mid-day meals scheme sponsored by Government;
- Transportation of students, faculty or staff of such institution.
The negative list specified the following services relating to education:
- Pre-school education and education up to higher secondary school or equivalent;
- Education as a part of a prescribed curriculum for obtaining a qualification recognized by law for the time being in force;
- Education as a part of approved vocational education course.
Approved vocational education courses have been prescribed in Section 65B of the Finance Act, 1994 which are as follows:
- A course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training, offering courses in designated trades as notified under the Apprentices Act, 1961;
- A Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Employment and Training, Ministry of Labor and Employment, Government of India;
- A course run by an institute affiliated to the National Skill Development Corporation set up by the Government of India.
The Education Guide issued by the Department furnished the following points in respect of educational services:
- Services provided by International Schools giving international certification like IB are also covered under exemption since it is equivalent to higher secondary school;
- The auxiliary educational services for all educational institutions are not exempted. Exemption is available for services to or by educational institutions in respect of education exempted from service tax. Therefore, service tax is chargeable on such auxiliary educational services which are in respect of education chargeable to service tax;
- Private tuition centers can avail the threshold exemption of Rs.10 lakhs;
- The 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 is not covered in the negative list entry. For getting exemption the course should be recognized by an Indian law;
- Placement services provided to an educational institutions for securing job placements for the students are not covered in the negative list entry;
- Service tax is liable on the services provided by the Educational Institutions such as NTs, IIMs, charging a fee from the prospective employers like Corporate houses/MNCs, who come to the Institutes for recruiting candidates through campus interviews since such services are not covered in the negative list;
- The services on conducting admission tests for admission to colleges are exempt;
- 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 66F of the Act. Such services in the case of boarding schools are bundled in the ordinary course of business. Therefore the bundle of services will be treated as considering entirely of such service which determines the dominant nature of such a bundle. In the case of services provided by boarding schools since dominant nature is determined by the service of education other dominant service of providing residential dwelling is also covered in a separate entry of the negative list, the entire bundle would be treated as a negative list service;
- 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 service which is not bundled in the ordinary course of business contained in Section 66F of the Act it is liable to be treated as a course which attracts the highest liability of service tax. 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. 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. taxmanagementindia.com
- ‘Education as a part of curriculum for obtaining a qualification recognized by law’ 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, institutions or universities 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;
- The advancement of educational programs or skill development relating to-
- Abandoned, orphaned or homeless children;
- Physically or mentally abused and traumatized persons;
- Prisoners; or
- Persons over the age of 65 years residing in a rural area.
