applicability of service tax for National cadets corps under MOD and educational organization, Service Tax

[puneet chadha]

Dear Sir,

I would like to solicit your leaned advice on the applicability of service tax on my organization. I am commanding officer of NCC ( National Cadets Corps) an organization under the Ministry of defence formed by an act of Parliament. However, it is submitted that though it enrols volunteers from students of schools and colleges, it has a proper curriculum and syllabus to be followed. By the circular of UGC NCC has been introduced as an elective subject and hence those volunteers who have joined NCC have to pass the examinations to achieve their degree or move to next class. My unit also as part of curriculum teaches flying microlite aircraft to the cadets. These aircraft are kept in the hangar at airport maintained by Airport authority of India for which a nominal rent of 10% is paid due to being a governement organization. Initially, commercial rent was charged by the AAI which was disputed and hence a nominal rent was agreed upon due internvention by ministry of civil aviation.However, there is no clarity on service tax . in the bills received service tax has been charged. since my organization is a government department and also an educational institution will it be charged service tax on the hangar rent. Kindly advise.

Posts / Replies

[KASTURI SETHI]

Go through Notification No.6/14-ST dated 11.7.2014 which amends original notification no.25/12-ST dated 20.6.12. (Serial No.9 refers). Exemption to educational institutional stands withdrawn w.e.f. 11.7.14.

[MARIAPPAN GOVINDARAJAN]

It is exempted as advised by Shri Sethi.

[Rajagopalan Ranganathan]

Sir,

You say that your main job is to impart training to students under NCC Scheme and the same is recognized as elective subject in the curiculam by the circular of UGC. Therefore you are engaged in providing educational service. Sl. No. 9 (b) of Notification No. 25/2012-ST dated 20.6.2012 as amended stipulates that " Services provided to an educational institution, by way of -

(i) transportation of students, faculty and staff;

(ii) catering, including any mid-day meals scheme sponsored by the Government

(iii) security or cleaning or house-keeping services performed in such educational institution;

(iv) services relating to admission to, or conduct of examination by, such institution.

are only exempted from payment of service tax. Since the service provided by you is not exempted you have to pay service tax. Moreover the service is provided to you by AAI and they are liable to charge service tax on the rent collected by them from you. Collecting rent by AAI from you is not exempted from service tax.

[YAGAY AND SUN]

Provided such collection of rent surpasses the threshold limit.

[puneet chadha]

Dear Sirs,

I am so thankful to get responses from the best of the learned professionals and feel elated. I have certain further submissions and inputs for your kind comments. The rent annually amounts to about 120000..One lakh twenty thousand..I am not aware of the annual limit..This amount is inclusive of the service tax..also Will my unit also b covered in the same notification clause being a government organization and AAI too being a partial government body. Secondly, construction of a civil structure which in this case is the hangar for keeping my aircraft, a government property for an educational purpose...And that too for non profit purpose for the propagation of aviation in the country, for general good, am I eligible for not paying the service tax...

[KASTURI SETHI]

Sh.Chadha Ji,

No exemption is available to Govt., Local Bodies and Govt. authority for renting out immovable property. AAI is thus falls under the definition of Govt.for the purpose of ST. but if any Govt. organisation/,institution charges rent (whatever amount may be) it is called business/ commercial activity. For business activity, no exemption is available to Govt.

Now here situation is somewhat different for you. If Govt. (may be Govt. Authority or local body) provides service of renting out immovable property to business entity, then Reverse Charge Mechanism is applicable. That particular business entity is required to pay 100% ST as service receiver.In that situation, business entity is eligible for threshold exemption limit of ₹ 10 lakhs under Notification No.33/12-ST read with Serial No.6 of Notification No.30/12-ST dated 20.6.12 as amended vide Notification No.18/16-ST dated 1.3.16. The words, "by way of support services" stand omitted w.e.f. 1.4.16. Also read Point No.10.2 & 11.4 of Board's D.O. F. No. 334/8/2016-TRU, dated 29-2-2016 which are extracted below:

"10.2 The liability to pay service tax on any service provided by Government or a local authority to business entities shall be on the service recipient. Consequently, notification No. 30/2012-S.T. is being amended so as to delete the words ‘by way of support services’ appearing at Sl. No. 6 of the Table in the said notification with effect from 1st April, 2016. Further, 1st April, 2016 is being notified as the date from which the words ‘by way of support services’ shall stand deleted from paragraph 1, clause A(iv), item (C) of notification No. 30/2012-S.T.

The above changes shall come into effect from the 1st day of April, 2016."

"11.4 At present, support services provided by Government or local authorities to business entities are taxable under reverse charge mechanism that is the liability to pay service tax on such services is on the service recipient. With effect from 1st April, 2016, any service (and not only support services) provided by Government or local authorities to business entities shall be taxable. Consequently, 1st April, 2016 is being notified as the date from which the word “support” shall stand deleted from rule 2(1)(d)(i)(E) of Service Tax Rules, 1994 so as to provide that the liability to pay service tax on any service provided by Government or local authorities to business entities shall also be on the service recipient on reverse charge basis."
In view of above, no exemption is available. It is statutory duty of Service Provider to collect ST from Service Receiver and deposit with the Central Govt.in terms of Section 68 (1) of the Finance Act. In my view AAI is charging ST correctly from your organization.

 

[puneet chadha]

Dear sir,

I need clarification on the point of any construction for various activities in which educational propose is given exemption. Ahangar is civil construction under which I carry out educational activities of NCC.... Secondly, I am a govt body and so is AAI.working as a custodian of govt airport. As a logic will govt rent out to itself, consider it as a commercial activity and collect tax from itself, then AAI while charging rent should pay service tax and not charge from my educational institution, because I am not doing any business, charges should not be passed on to me..I am contributing to a govt programme.. Without any commercial interest or activity...

[KASTURI SETHI]

It is not a question of service by one Govt. to another Govt. Pl. note that tax comes from the pocket of public/common man.As per ST law, you are not eligible for exemption from ST as already explained above.

[KASTURI SETHI]

AAI is autonomous body and not Govt. There are different definitions of ' Govt.' Service wise. It is service by autonomous body to Govt. School and exemption withdrawn to education in this situation.

[puneet chadha]

Dear sir,

Once again I would like to thank all the learned fraternity for educating me. However, I would like to draw your attention towards clause 12 of notification which refers to construction, commissioning and similar phrases referring to a structure used for educational activities is exempted. My humble submission for the kind opinion is that my microlite aircraft parked in the constructed hangar are used for purpose of education and are not for any commercial activity..Or business satisfying the clause in my personal opinion... However, since it is not my domain expertise I seek the advice of the distinguished members of this forum..

[puneet chadha]

Dear sir, I was referring to the amendment given below, according to which my unit qualifies for being an educational institution, also a civil structure has been made which is not being utilized for commercial activity, and it is being utilised for education activity for NCC cadets. In view of the following, kindly advise if my unit is eligible for the service tax exemption.

NOTIFICATION No.9/2016-Service Tax, New Delhi, the 1st March, 2016

[KASTURI SETHI]

This notification talks of exemption from ST to construction etc. and not renting of immovable property. In your case AAI charges rent for using AAI's immovable property.