Transportation of School Students, Goods and Services Tax - GST

[Rushab Jain]

We are running a business of transportation of school students. We had an formal agreement with the school that we will provided services of transportation of school students. However we do not receive any consideration from school nor we raise any invoice on school. Entire consideration is received from school students directly. Now my question is whether these services is taxable or exempt?

If it is taxable or exempt please specify under which head i.e service to educational institution or transport of passenger

Posts / Replies

[YAGAY and SUN]

NIL Rate of GST is applicable on followings.

Education (pre-school to high secondary) including-

(i) transportation of students, teachers and staff;

(ii) mid-day meals and other catering

(iii) security and house-keeping services performed in schools

(iv) admission to, or conduct of examination by, such institution upto higher secondary.

[Rushab Jain]

Sir, Services in my case are not rendered by school but by a transporter.

[YAGAY and SUN]

In our reply it is no where mentioned "By School". Please re-check.

[KASTURI SETHI]

Dear Rushab Jain,

Reply posted by M/s. YAGAY And SUN, Sirs is 100% correct. Service provided "By School and To School" both are exempted from GST. No room for doubt. See Serial No.66 of Notification No.12/17-CT(Rate) dated 28.6.17.

[Rushab Jain]

Dear Sirs,

Sorry to bother you again. The only confusion with me is the consideration is flowing from students and not from school and if we go by word specific it says services to educational institution( according to me either invoice should be raised on school or consideration should be received from school). That is why i am confused to treat it as a service to educational institution.

Thanks

[Rajagopalan Ranganathan]

Sir,

Since you are receiving consideration from the students directly, alternatively you can charge gst @ 2.5% vide Sl. No. 8 (vi) of Notification No. 11/2017-Central Tax (Rate) dated 28.6.2017 as amended subject to the condition that " credit of input tax charged on goods and services used in supplying the service, other than the input tax credit of input service in the same line of business (i.e. service procured from another service provider of transporting passengers in a motor vehicle or renting of a motor vehicle), has not been taken."

[Alkesh Jani]

Sir, Please confirm you turnover. is it above threshold limit?

Thanks

[KASTURI SETHI]

With due regard, I express my opinion as under :- Ultimat goal is exemption to education that is not to tax student. If Notification 11/17 - CT Rate comes into play, the very purpose of exemption to education will be defeated.

[KASTURI SETHI]

Threshold exemption is secondary issue. Primary issue is whether exemption available in the situation explained by the querist.

[Rushab Jain]

Dear Sirs,

Sorry for my late reply. I totally agree with Kasturi sir that the very purpose of that notification will be defeated if gst is payable on transportation of school students. However I would like to bring to the notice of all the definition of service recipient detailed below

As per Section 2(93) of the Central Goods and Services Tax (CGST) Act, 2017, unless the context otherwise requires, the term “recipient” of supply of goods or services or both, means-

(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;

(b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and

(c) where no consideration is payable for the supply of a service, the person to whom the service is rendered,

and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied.

According to the definition, service recipient in my case are school students( means parents) as consideration is received from them, then I think in my case it would be a taxable supply.

Please clarify, I might be wrong in interpretation.

Thanks

[KASTURI SETHI]

No person can pay any tax on one's own volition. In this situation, Service Receiver is student and not parents. Nobody can deny it. You can write name of student, class, school and parents'name on the invoice. This supply of service is fully exempted. You require to prepare invoice as documentary evidence of service provided to education institution. Are students not part of educational institutions ? Main beneficiary of this exemption is student and you want to deny the same. You cannot snatch this benefit from the students by treating parents as Service Receiver. Parents are not in picture for this benefit though payment is to be made by them Govt.does not want to charge tax from students for transportation. Paying tax by way of one's own interpretation, tantamounts to one's own volition. Better option is to get clarification in writing from your jurisdictional Commissioner. You can not deny the benefit of exemption granted to students by Govt. These are my views.

[Rushab Jain]

Dear Kasturi Sir,

I agree with you Sir that the benefit cannot be denied however I am just scared of the litigation which might arise in future with respect to its taxability and readiness of the assessee to face it. Also the purpose of writing parents was just that they cannot be a party to contract.

Further I have found one case law of Service Tax which is similar to this business model, the citation of Case Law

"Sangam Travels vs. CCEX, Kanpur" dated 10-1-2017 where in CESTAT Allahabad held in favour of the assessee."

However this is Service Tax Case law , can we apply it in GST for our reference in Maharashtra though it is of Allahabad?

Thanks Once Again

[KASTURI SETHI]

Dear Queries, Let me examine this case law in detail.Thereafter I would be able to express my opinion.

[Alkesh Jani]

Sir,

My intention to ask the turnover, was that, if the transporter’s aggregate turnover, is below threshold limit, GST Act is not applicable and if the turnover is above threshold limit, applicability of Act and Notification can be discussed.

Assuming the turnover of transporter is above the threshold limit, than my view is that, the services are provided to the passengers (here student) and not to educational Institute. Even in case of educational Institute, the exemption is available upto Higher Secondary level, so the exemption to Student of above Secondary level is not extended. When exemption is availed it is on onus on the person availing such exemption to prove that exemption is available to him.

Moreover, the entire consideration is received directly from the student, therefore, educational institute does not come into the whole scenario, therefore, in no way it can be said that services are provided to educational institute.

The Notification No.12/2017 Sl. No. 66 clearly states that “(a) by an educational institution to its students, faculty and staff;” and “(b) to an educational institution, by way of,…….”. In view of above, I do not find that educational institute comes into role anywhere in this activity. Here, it is mutual agreement to provide the said service between student and the transporter. Therefore, GST is applicable in the present case.

Our experts may correct me if mistaken.

Thanks

[Rushab Jain]

Dear Sir,

If the same is transportation of passenger ,it will be exempt because it is through non-ac contract carriage.

Please justify / clarify.

Thanks

[KASTURI SETHI]

Issue is being deviated. I still stick to my views. However, if you want to be tension-free, opt for advance ruling. Without advance ruling, no officer will give clear cut reply. Only last resort is AAR.

[YAGAY and SUN]

Yes, Advance Ruling will sort out your issue definitely.

[Rushab Jain]

Dear Sir,

I had gone through your post and noted that it will be better to have advance ruling from the Department. However will request you to give your final comments considering the case law " Sangam Travels vs. CCEx, Kanpur decided by CESTAT allahabad".

Thanks

[Alkesh Jani]

Sir,

The clarification as requested by you is that, a contract may be written or verbal, if executed. In your case, you agreed to pick up the student and to drop at the school with agreed consideration, is nothing but execution of contract. The same thing is mentioned in last para of my reply. Please also go through the definition of contract carriage” given in Motor vehicle Act.

Finally I will say “take the best leave the rest”.

Thanks

[KASTURI SETHI]

The case law of Sangam Travels is a classification dispute. Not relevant in your case.

[Ganeshan Kalyani]

The exemption notification states service supplied to educational institution by way of transportation of student. Hence in this query the querist supplies service to the student which satisfies the condition therefor the service is exempt. I go with the views of Sri Kasturi Sir.

[Ganeshan Kalyani]

Yes advance ruling would be a good solution to get the query solved.

[Rushab Jain]

Dear All,

Sorry for disturbing you all again.

However what will be GST Taxability if school who is insisting on issuing the Receipt in his name though Bank account belongs to us?

My opinion is that if this is the case then we are indirectly receiving money from school. Hence this is exempt.

PLease clarify if I am wrong.

[KASTURI SETHI]

I understand well that this is a hypothetical question. Anyhow it is to be replied. There is no dispute or doubt about exemption, if you receive your transportation charges from school via bank account.

[Shameem Ahmed]

There are two views expressed above. One is based on purposive interpretation and the other one is based on literal interpretation. In this case, a literal interpretation will defeat the very purpose of exemption. In my view, exemption call be very much availed. In order to avoid any litigation, the transporter can enter into a service agreement with the school for transport of its students and fixing the rate, but in the consideration clause, it can be mentioned that fee as per the agreed clause shall be collected directly from students and such payments made shall be treated as the payment by school.