GST on Extra Classes, Goods and Services Tax - GST

[Rajesh Kumar]

Respected experts,

As per para No. 2.1 of Circular No. 85/04/2019 dated 01.01.2019,wherein it has been mentioned that

Supply of all services by an educational institution to its students, staff and faculty is exempt under Notification No. 12/2017- CTR dated 28.06.2017 Sr. No. 66.

1. Please guide whether all services cover preparation of NDA, IIT, PMT various competitive entrance exam etc. on additional consideration or these activities are taxable.

2. Whether extra classes provided by schools after school hours are taxable or exempted ?

3. Whether the supplies done by school other than education like sale of bus, furniture or other school articles are taxable under gst?

Posts / Replies

[Amit Agrawal]

Now, kindly allow me to explain how can there be third / many more arguments and finer points of defence etc. and why one needs to be careful before reaching 'final conclusion':

educational institution” means an institution providing services by way of,- (i) pre-school education and education up to higher secondary school or equivalent; ..............

All the competitive exams - as quoted by you - requires student passing higher secondary school or equivalent.

Now, question arose why coaching (i.e education) provided by ANYONE (i.e. not just by a formal junior college but a even a stand alone commercial coaching centre) for preparing students for these competitive exams does not fall under the term 'an institution providing services by way of pre-school education and education up to higher secondary school or equivalent'?

Ultimately, these 'competitive exams' evaluate students on the basis of their education up to higher secondary school or equivalent.

Furthermore, Clause (ii) (i.e. 'education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force' ) does NOT apply for clause (i) (i.e. pre-school education and education up to higher secondary school or equivalent).

Considering specific clause (ii) and generic clause (i), one can argue that for providing services by way of pre-school education and education up to higher secondary school or equivalent, same need NOT be education as a part of a ANY specified curriculum (i.e. formal / pre-defined curriculum).

As you will notice, this aspect is not at-all covered by anyone in earlier posts.

Of-course, above line of defence is just part of my thought-process (Disclaimer: I have not given very deep thought - as of now - on this line of defence), if I have to defend ANYONE claiming exemption from GST in given situation under discussion here.

So, point - I am trying to make here - is that the subject issue has many facets and one must be careful before reaching "final conclusions" ..... one way or other.

I hope my posts are taken in right spirit by everyone and discussion is taken forward in positive manner ............

These are ex facie views of mine and the same should not be construed as professional advice / suggestion. And I respect contrary views.

[Padmanathan Kollengode]

Learned Friend Amit Ji,

This issue has been examined by Madras High Court in MADURAI KAMARAJ UNIVERSITY v JOINT COMMISSIONER, OFFICE OF THE COMMISSIONER OF GST AND CENTRAL EXCISE, MADURAI 2021 (9) TMI 516 - MADRAS HIGH COURT

Though not directly on the very same issue, it is worth reading while interpreting the exemption entry.

11. After having gone into these arguments and the connected records, this Court feels that, the only question posed before this Court for decision is that, whether the services rendered by the petitioner university by granting affiliation and its allied activities and also by providing shelter in their campus to the service providers like Bank, Post Office, or catering etc., directly beneficial to the students, staff and faculty of the university, are exempted services within the meaning of Section 66-D of the Finance Act and also under the Mega Exemption Notification of the year 2012 as amended from time to time.

12. The history of introduction of service tax has been traced by the learned Counsel for the petitioner, which has been discussed in the earlier paragraphs. Up to 2012, the term “service” seems to have not been explained. First time, the term “service” has been explained under Clause 44 of Section 65-B, which has already been quoted hereinabove.

13. While giving such explanation for the term “service”, the legislature also thought it fit to introduce two sections, namely, Section 66-B and 66-D. 66-B is a charging section which makes it clear that, there shall be levied a tax at the rate of 12% on all services other than those specified in the negative list. Therefore, what are all the services provided under the negative list are taken away from the purview of Service Tax net. The exempted services as provided under Section 66-D Clause 'l', alone has been quoted hereinabove.

14. Under Clause 'l' there are three categories of services by educational institutions. One is pre-school to higher secondary education service, second is education as a part of curriculum for obtaining a qualification recognised by law for the time being in force and the third one is education as a part of an approved vocational course. This Court feels that, sub-clause 2 of Clause 'l' of Section 66-D is relevant for the present issue, the reason being that, whatever be the education as a part of curriculum for obtaining a qualification recognised by law for the time being in force means whatever be the Degree, Diploma, PG diploma, Professional Degree or Post Graduate Degree are concerned, in order to obtain such qualification, if education being imparted as a part of curriculum, that education shall be part of service for the purpose Clause 'l' for getting exemption.

15. When an educational institution is imparting education as part of curriculum for obtaining a qualification as stated supra, no doubt, such services are being exempted and in this context, there can be no quarrel from the revenue side also.

16. However, whether such kind of service of imparting education as part of curriculum for obtaining a qualification whether is rendered by the petitioner university is a question where, it is the stand of the revenue that, the university is not directly imparting any education except providing affiliation to the institution, but would not deal with imparting education to the students. Therefore, the activities of affiliation and allied activities like inspection etc., cannot be treated as imparting education by the educational institution concerned.

17. However, insofar as the said stand taken by the revenue is concerned, we must take into aid the expanded provision which has subsequently been inserted under mega notification referred to above, whereby, clause 9 has been inserted with effect from 11.07.2014, where, the services provided by the educational institution to its students, faculty and staff are mentioned. The word “students”, that we can understand, with, the services provided, is nothing but imparting education, whereas, the services to be provided by the educational institution to its faculty and staff is concerned, certainly, it may not be a direct activity of imparting education. No staff or faculty is going to get any imparting of education either from the institution or from the university. Hence, it is not limited to the services of imparting education to students alone for the purpose of exemption, but, it expands beyond which, where, whatever the services to be provided by the educational institution to its faculty and staff shall also form part of the activity of education being provided by way of services by the educational institution. If we take up this language used, exactly, the services provided by the educational institutions including the university not only for students but also for faculty and staff would be covered under the exempted purview.

18. Not stopping with that, it goes further saying that, an educational institution can render services by way of transportation of students, transportation of faculty and transportation of staff. Like that it further goes, like, catering including any mid-day meal scheme sponsored by the Government. It further expands to security or cleaning or housekeeping services performed in such educational institutions. It also expands to services relating to admission or conduct of examination by such institutions. The word 'such institution' according to the revenue is nothing but the institution which impart education and conduct examination ie., affiliated college and not the university. But, in the considered view of this Court, that kind of interpretation is not possible, in view of the expanded meaning that has been given and the explanation given, which shows the intention of the Central Government who issued the mega exemption notification, under which, we can understand that, what are all the allied services that shall form part of the educational services, which may be services provided to the staff, services provided to the faculty, expanded services like transportation, boarding and lodging and other allied activities enabling the students as well as the staff and faculty to come to the institution and getting imparted the education.