EDUCATION SERVICES UNDER NEGATIVE LIST

[Dr. Sanjiv Agarwal]

Service Tax

Service tax is an indirect tax to which education and coaching services could be exposed. Service Tax law is a branch of tax where frequent changes have been made ever since it was enacted in the year 1994 by the Finance Act, 1994 through Budget amendments- Notifications and CBEC’s Circulars.

W.e.f. 01-07-2012, all services barring those which are in the Negative List (Section 66D of the Finance Act, 1994) or have been exempted by way of exemption notifications are in Service Tax net. We discuss the applicability or otherwise of Service Tax on education related services pre and post 1.07.2012 in this document.

Services relating to Education Sector covered under Negative List

Section 66D of the Finance Act, 1994 contains Negative List of Services. The clause (l) of section 66D relates to education related services. The said clause (l) of Section 66D of the Act provides for the following negative list services in relation to educational sector:

Services by way of -

(i) pre-school education and education up to higher secondary school or equivalent;

(ii) education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force;

(iii) education as a part of an approved vocational education course

According to the negative list, there are three categories of education covered under this list and hence non-taxable. These are as under:

Pre-school education – includes play schools, pre-nursery and nursery schools, crèche, day care centre, pre-kindergarten or any such purpose school or centre by whatever name called.

As per www.newworldencyclopedia.org, ‘Preschool education’ is education that focuses on educating children from the ages of infancy until six years old. The system of preschool education varies widely, with different approaches, theories, and practices within different school jurisdictions. The term preschool education includes such programs as nursery school, day care, or kindergarten, which are occasionally used interchangeably, yet are distinct entities. While pedagogies differ, there is the general agreement that pre-school is responsible for providing education before the commencement of statutory education.” In academic parlance, ‘pre-school / early childhood education’ is defined as a pedagogical approach covering the education of children from the period from birth to six years of age.

Education upto higher secondary school or equivalent – includes school education which is up to higher secondary (12th standard) or equivalent level (say, intermediate). Any education beyond higher secondary is not covered here. The use of expression ‘equivalent’ provides wider scope to school education implying that all education up to school leaving are in negative list. Even if it is provided by international school providing international certificate, it will be out of Service Tax net.

Education as a part of curriculum leading to recognized qualification – unlike school education where any school education is covered, education qualifies for negative list only if certain conditions are met, viz,

1. education must be imparted as part curriculum
2. such education should be for obtaining a qualification (say a degree, diploma, certificate etc.)
3. such qualification should be recognized by any law (Indian law only) for the time being in force.

If any of the aforementioned conditions is not satisfied, the education shall not qualify to be under the negative list. The use of words "law for the time being in force" implies that such laws as are applicable in India at a given point of time. In such cases, education is imparted under a prescribed syllabus or curriculum and the education must be imparted as a part of such curriculum, i.e. it must be a part of syllabus for such course or qualification. However, education leading to foreign qualifications shall be liable to payment of Service Tax. In Indian, context, it may be noted that recognition is granted by bodies such as University Grants Commission (UGC), All India Council of Technical Education (AICTE) etc.

Approved vocational education course - Approved vocational education course has been defined in section 65B(11) of the Finance Act, 1994. These are –

• 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. (w.e.f. 10-5-2013, affiliations to State Council for Vocational Training are also covered)
• 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 Labour 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. (only upto 9-5-2013)

Negative list may, therefore, not include –

1. Private tuitions
2. Education as a part of prescribed curriculum for obtaining qualification recognized by law of a foreign country
3. Services provided to educational institutions (except covered elsewhere)
4. Placement services
5. Services provided by educational Institutes such as IITs, ITMs charge a fee from prospective employers like corporate houses / MNCs, who come to the institutes for recruiting candidates through campus interview.

The admission / examination fee is covered under negative list. Further, tuition fee or development fees are also not liable for Service Tax. When students avail the services of admission / development / examination and pay the fees in respect of such services alongwith basic tuition fee, it may be considered as a case of bundled services where tuition is having dominant nature covered under negative list and accordingly, all other fees charged mandatorily along with tuition fees would not be liable for service tax.

Illustrations

The inclusion in / exclusion from negative list [section 66D(l) of Finance Act, 1994 ] for different types of education related services can be illustrated as follows :

Nature of Service	Taxability
School education upto 12th standard	Covered under negative list - Not taxable.
School examinations fee, etc.	It is part of education and hence covered under the negative list - Not taxable
Conveyance facilities to students	If part of education and cannot be separately covered under negative list - Not taxable
Approved vocational educational course	Covered under negative list - Not taxable
Boarding school (package offered inclusive of food, rent, etc.)	Covered under negative list - Not taxable; Essential character being education, non-taxable as per rule of bundled services
College education (affiliated to an Indian university)	Recognized by law, covered in negative list - Not taxable
Test for admission in a college / institution	If recognized by law, covered in negative list - Not taxable
Campus recruitment fee	Taxable
Courses recognized by foreign law	Not covered under negative list - Taxable
Coaching centre's services	Taxable
Placement services	Taxable
Grants-in-aid	As per Rule 6(2)(vii) of the Service Tax (Determination of Value) Rules, 2006, subsidies and grant disbursed by the Government, not directly affecting the value of service, will be excluded from the value of service - Not taxable