EDUCATION RELATED SERVICES SPARED FOR SERVICE TAX

[Dr. Sanjiv Agarwal]

While Service Tax is levied on almost services, barring few listed in negative list and exempted services, there are certain sectors which enjoy the special privileges.  Education sector has got immunity from Service Tax for some services while some others are exempt. Education is one such sector which enjoy privilege under Service Tax and rightly so. While services in relation to in school and pre-school education are not taxable at all, being in negative list, higher education as a part of a curriculum for obtaining a qualification recognized by law in India is also not taxable. Similarly, there is no Service Tax on any approved vocational course. There is also a specific exemption for services provided to educational institutions in respect of exempted education by way of renting of immovable property and auxiliary services.

The following services relating to education are specified in the negative list -

• 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 an approved vocational education course

Services provided to educational institutions are not covered under in this entry. However, certain services provided to educational institutions are separately exempted by Notification No. 25/2012-ST, dated 20-6-2012.

The following services provided to an educational institution in respect of education are exempted from service tax, by way of,-

(a)      auxiliary educational services; or

(b)      renting of immovable property

So far as exemption to education related auxiliary services and concerned, it means any services relating to imparting any skill, knowledge, education or development of course content or any other knowledge -enhancement activity, whether for the students or the faculty, or any other services which educational institutions ordinarily carry out themselves but may obtain as outsourced services from any other person, including services relating to admission to such institution, conduct of examination, catering for the students under any mid-day meals scheme sponsored by Government, or transportation of students, faculty or staff of such institution.

Thus, auxiliary education services shall cover the services in relation to educational activities only and include -

(i)   any service relating to imparting any

• skill
• knowledge
• education
• development of course content
• other knowledge enhancement activity

(ii)      whether for students or faculty

(iii)    out sourced activities ordinarily carried out by educational institutions

(iv)   services in relation to -

• admission
• conduct of examination
• catering of students under any mid day meal scheme sponsored by Government
• Transportation of students or faculty

Ministry of Finance (Central Board of Excise & Customs) had recently clarified on exemption provided to auxiliary services provided to education institutes vide Circular No. 172/7/2013-ST dated 19 September, 2013, as a response to various representations from educational sectors across the country. The Circular states in its operative clarification as under –

"3.  By virtue of the entry in the negative list and by virtue of the portion of the exemption notification, it will be clear that all services relating to education are exempt from service tax. There are many services provided to an educational institution. These have been described as “auxiliary educational services” and they have been defined in the exemption notification. Such services provided to an educational institution are exempt from service tax. For example, if a school hires a bus from a transport operator in order to ferry students to and from school, the transport services provided by the transport operator to the school are exempt by virtue of the exemption notification.

4.  In addition to the services mentioned in the definition of “auxiliary educational services”, other examples would be hostels, housekeeping, security services, canteen, etc."

Owing to prevailing confusions amongst tax payers and rumors, Ministry of Finance has issued a clarification wherein taxability of various services provided to educational institutes has been clarified. There are many services provided to an educational institution. These are described as auxiliary education services and they have been defined in the exemption itself. Such services provided to an educational institution are exempt from Service Tax. For example, if a school or a college hires a bus from a transport operator in order to ferry students to and from school or college, the transport services provided by the transport operator to the school are exempt by virtue of the specific notification. Similarly, services in relation to hostels, house–keeping, security services, canteen etc shall be exempt from levy of Service Tax.

However, this exemption has a catch. These exemptions are available only for educational institutes and not for commercial coaching institutes. Thus, any coaching or training or tuition aiding the education would not be able to enjoy this exemption, as the exemption is only for education or services in relation to education. Further, services provided to such educational institutes or bodies alone are exempt.