TAXATION OF COMMERCIAL COACHING – SOME JUDICIAL INTERPRETATIONS

[Dr. Sanjiv Agarwal]

Commercial coaching and training are taxable in India from 1^st July, 2003. However, w.e.f. 1.7.2013, when Service Tax migrated from positive list approach to negative list approach, some educational services were placed in negative list while certain other exemptions were provided to auxiliary services in relation to education.

Prior to 1.7.2012, vocational training (as defined earlier) and recreational training were exempt. Besides, pre-school education, sports related coaching or other courses leading to any certificate or diploma or degree or any educational qualification recognized by law were excluded fro the scope of taxable service.

Negative List

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

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.

Exemptions

Education related services not in negative list but exempt from tax under Notification No. 25/2012-ST dated 20-6-2012 are as follows -

(a)      Transportation of students to/from institutions

(b)      Provision of mid-day meal in schools

(c)      Admission related services to educational institutes where education services are exempt.

(d)     Coaching/training in recreational activities of arts, culture or sports.

Judicial Pronouncements

Judicial pronouncement help in interpretation of the taxability as well as tax liability in any tax law. Following judicial interpretations are relevant to understand nuances of commercial coaching and training.

In Great Lakes Institute of Management Ltd. v. CST, Chennai 2013 (10) TMI 433 - CESTAT NEW DELHI - LB, larger bench held that the taxable service of "commercial training or coaching" occurs when any institute or establishment is engaged In the activity of imparting skill, knowledge or lessons on any subject or field (excluding sports), irrespective of whether such imparting of skill, knowledge or lessons is in respect of particular discipline or a broad spectrum of disciplines/academic areas; irrespective of the nomenclature or description of the institute or establishment, as a coaching or training centre or an educational institution; regardless of whether an institute or establishment is incorporated by or registered under any law; and irrespective of distinctions on the basis of curriculum, course content, teaching methodology, course duration or otherwise. Activities of imparting skills, knowledge, lessons on any subject or field or when provided by any entity, institution or establishment which is excluded by a specific and legislated exclusionary clause would alone be outside the fold of the taxable activity.

In IILM Film & Media School v. CST, New Delhi 2013 (5) TMI 27 - CESTAT NEW DELHI , in relation to exemption for vocational training, it was held that exemption notification merely requires vocational training to impart skills to enable trainee to seek employment or undertake self employment. Establishment of fact that one or some or all students obtain employment or have pursued employment after completion of course is not required.

In ICFAI v. Commissioner 2008 (10) TMI 59 - CESTAT, BANGALORE, it was observed that coaching normally refers to a special teaching or a personalized teaching in certain subjects. Training is generally used to refer to practical instruction or learning process. Education is the process of overall development of a person. It included moral, intellectual and physical development of a child or a person. It is not restricted to a particular subject and it covers various subjects and arrears. Moreover, as distinguished from coaching, education is not meant for succeeding in an examination or test but for overall development of the student. Education is a term of wide import and encompasses within its ambit the specialized function of training and coaching but this does not make all the three terms synonymous in nature.

In Werner Haderer v. Finanzamt Wilmersdorf (2013) 40 STT 115 (ECJ), where assessee was a private teacher and providing services to an educational institution not directly to pupil/students, it was held that impugned services provided by assessee were not covered by negative list entry under section 66D(l) and therefore, liable to service tax.

In Indian Institute of Aircraft Engineering v. Union of India 2013 (5) TMI 592 - DELHI HIGH COURT, where assessee was an aircraft maintenance engineering training school approved by Directorate General of Civil Aviation (DGCA) and engaged in providing aircraft maintenance engineering training, it was held that training provided by the assessee was a course recognized by Aircrafts Act / Rules and directions issued thereunder and such training was to be considered as exempt from service tax.

In Rayudu Vision Media Ltd. v. CCE, Hyderabad 2013 (12) TMI 52 - CESTAT BANGALORE, where assessee provided 2D and 3D animation courses through computer medium, it was held that it cannot be said to be have provided computer training but only vocational training. Computer hardware and software constitute medium for providing such training.

In Sun Micro Systems (I) Pvt. Ltd. v. Commissioner (LTU), 2013 (12) TMI 867 - CESTAT BANGALORE, where demand of Service Tax was raised on CD ROMs sold to students containing ‘live virtual classes' provided to enhance skill or impart knowledge and online learning (e-learning) and where it was a case of self learning an material in CD ROMs and there was no interaction between teachers and students, it was held that unlike regular coaching, there is no institute and no contact between students - teacher and as such, activities would, prima facie, not be covered under commercial training or coaching services.

These are still relevant as there are large number of adjudication and appeal matters pending before various forums.