EXEMPTION FOR SERVICES TO EDUCATIONAL INSTITUTIONS

[Dr. Sanjiv Agarwal]

Specified services provided to or by educational institutions are exempt. Subject to conditions, following services are exempt under Entry No. 9 of Notification No. 25/2012-ST dated 20.6.2012

Services provided to or by an educational institution in respect of education exempted from service tax, by way of,-

(a) auxiliary educational services; or

(b) renting of immovable property;

“Auxiliary educational services” as defined in clause 2(f) of the notification 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

Exemption is available only in relation to specified services to or by educational institutions in respect of that education which is exempted from service tax (Refer Para 5.4 of this opinion). Therefore, service tax shall be chargeable on such auxiliary educational services which are in respect of education chargeable to service tax. Thus, it calls for twin tests to qualify for exemption in this entry –

a) Education itself being provided to / by educational institution should be exempt from levy of Service Tax

b) The underlying service should be covered under auxiliary education service.

If any of the aforementioned auxiliary services do not pertain to education per se, it may not be termed as auxiliary education service. To have a nexus with education is a necessary precondition. It must relate to the specified activities viz,

• skill, knowledge or education (but not coaching)
• development of course content (e.g. syllabus)
• any knowledge enhancing activity (say a seminar, conference or a quiz event)
• activities outsourced in ordinary course of education (say, admission, examination etc.)

So far as admission is concerned, outsourced activities could be designing the form / prospectus / brochure, supply and issue of forms, receipt of filled up form, receipt of payment, scrutiny of form, preparing admission lists etc. Examination work may include work relating to forms, fees, appointment of examiners and paper setters, conducting exams, evaluation, managing exam centers, result preparation, announcement of result etc.   taxmanagementindia.com

The other condition for exemption under Entry No. 9 is that the education itself should be exempt. This implies that only the nature of service is not enough for availing the exemption but it is also important that education being provided should also be exempt.

= = = = = = = = = =