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

[Shilpi Jain]

ANY services provided to ITS STUDENTS by the educational institution will be exempt. So competitive exams coaching imparted to them by school and extra classes will be exempt as well.

Sale of other articles would be liable to GST. You should explore other ways of working in this scenario to see that these kind of one off transactions do not attract the requirement of registration.

[Rajesh Kumar]

Ma’am

What is an Educational Institution under GST?

Under GST, “educational institution” is defined as an institution providing services by way of:

• Pre-school education and education up to higher secondary school or equivalent;
• Education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force;
• Education as a part of an approved vocational education course;

As per above definition, if school provides education other than ‘Pre-school education and education up to higher secondary school or equivalent; Education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force; at that portion, school will not be educational institutions.

Further, if school is not educational institution for this portion, no exemption is allowed.

Therefore, I think GST is applicable on imparting education for extra consideration other than supplies defined in definition.

Otherwise, there will be no difference between schools and coaching centers.

[Amit Agrawal]

In my view, exemption from GST is not available for additional services provided (i.e. preparation of NDA, IIT, PMT various competitive entrance exam etc.) at separate consideration.

Any exemption notification needs to be interpreted strictly and where two views are possible, interpretation benefitting the revenue will be upheld and not the interpretation benefitting the person claiming exemption.

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

[Rajesh Kumar]

Sir/ Madam,

Both views are contrary to one another. Guidance from other experts required, please.

Regards

[Padmanathan Kollengode]

Dear Rajesh,

I concur with the views of Shilpi Ma'am. You have to look at two things here only - whether the institution is an 'education institution' or not? and whether the service is provided to 'ITS students, staff and faculty' or not? if the answer to both these questions are yes, then 'ALL service' provided by it shall be exempt in my humble opinion.

So, the answer to Question 1 and 2 depends upon whether the services are provided to students of the educational institution or outsiders.

Regarding sale of bus, furniture and other school articles, it shall be taxable as the exemption is only applicable for services and not to goods.

[Shilpi Jain]

Also note that strict interpretation of exemption notifications is not the thumb rule.

While checking whether te subject falls withing the exemption strict interpretation Is required. Then it should be a liberal interpretation of the conditions and procedures, see decision in the case of Mother Superior case

Also if you look at various high court decisions under service you will note that this entry for educational institution has been most liberally interpreted.

[Rajesh Kumar]

Respected Sir & Ma’am

The instant matter is of a school that gives education from pre-primary to 12th standard.
Therefore, first condition or requirement to be an educational institution is fulfilled.

Secondly, it covers institutions providing services by way of education as a part of curriculum for obtaining a qualification recognised by any law for the time being in force.

Now, issue is this school also provides preparation of NDA, IIT, PMT various competitive entrance exam etc. on additional consideration to its students. This additional preparation service is not education as a part of curriculum for obtaining a qualification recognised by any law for the time being in force.

Therefore, to this extent of additional preparation, the said school is not a educational institution.
Further, the minimum qualification for NDA, IIT, PMT & various competitive entrance exam is 12th pass. In this way also, school is not providing education upto higher secondary school.

Accordingly, in my view, GST is payble to that portion which is not covered in the definition of educational institutions.

Humble opinions please.

[Padmanathan Kollengode]

Mr. Rajesh, in my humble opinion once the requirement of educational institution is satisfied, the requirement of curriculam need not be seen qua each services.

If the intention was to provide exemption to only those services which are within curriculam, what is the relevance of "ALL services"?

Thus, in my humble opinion it is exempt. I respect contrary views.

[Amit Agrawal]

In continuation of my post at serial No. 3 above, I wish to elaborate my thought-process as follows:

A. Even though the querist has used the wordings 'Supply of all services by an educational institution to its students, staff and faculty is exempt ......' in his query, there is no such word as 'all' which is used in Entry at Serial no. 66 (a) of referred notification. Be that as it is.

B. Said wordings of Entry at Serial no. 66 (a) are as follows: "Services provided by an educational institution to its students, faculty and staff"

C. The definition of 'Educational Institution', as given in very same exemption notification under discussion here, reads as follows:

“educational institution” means an institution providing 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 recognised by any law for the time being in force;

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

D. Please note that exact wordings in the definition i.e. means an institution providing services by way of ............, which is specific definition, strictly defining when should an institution would be called as 'Educational Institution' for subject notification.

E. In my humble view, ONLY WHEN an institution providing services by way of one of three specified types of education, it can be called as 'Education Institution' for the purpose of claiming exemption against Entry at Serial no. 66 (a) of referred notification. And hence, such 'Education Institutional' are exempted from paying GST while providing services by way of one of three specified types of education.

F. On the contrary, if an institution providing services other than by way of one of three specified types of education, it can NOT be called as 'Education Institution' at-all for the purpose of claiming exemption against Entry at Serial no. 66 (a) of referred notification. And hence, in my humble view, such 'Institution' are NOT exempted from paying GST while providing services other than by way of one of three specified types of education (i.e. against Entry at Serial no. 66 (a) under discussion here).

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

[Rajesh Kumar]

Amit sir,

Supply of all services by an educational institution to its students, staff and faculty is exempt ......' is mentioned in para No. 2.1 of Circular No. 85/04/2019 dated 01.01.2019.

This ‘all’ is creating confusion. However in basis notification, it is not mentioned.

As per definition of Educational Institution, there are three points with using ‘by way of’ word.

Does it mean, all three points must be covered to be a educational institution or only one out of three sufficient ?

[Amit Agrawal]

Kindly note that said Circular No. 85/04/2019 dated 01.01.2019 is not even issued using powers of Section 168.

Anyway, if 'all' services were exempted, there was no need to amend said entry though said circular itself talks about various amendments carried.

Hypothetically speaking, if such institution starts suppling non-education services (i.e. services which got no connection with education services per se) such as say, management or finance or tax consultancy to students / staff / faculty, does that mean that 'all' such non-connected services are also exempt (when provided to students / staff / faculty) even if they got nothing to do with 'education' at all? In my view, such interpretation is not tenable.

As stated in explanation 3 (ii) to Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 Chapter, Section, Heading, Group or Service Codes mentioned in column (2) of the table in Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 are only indicative. But, that does not mean that they are 'irrelevant' for purpose of interpreting the said notification.

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

[Amit Agrawal]

In the context under discussion here, one should also not ignore importance of the word 'its' in Entry at Serial no. 66 (a) (i.e. Services provided by an educational institution to its students, faculty and staff).

One needs to read definition of 'Education Institution' (i.e. an institution providing services by way of one of three specified types of education) and then, link the same to exemption-entry (i.e. Services provided by an educational institution to its students ....).

The words 'Its student' re-enforces the fact that these are 'students of one of three specified types of education' provided by such 'educational institution'.

When 'Education Institution' (i.e. an institution providing services by way of one of three specified types of education) starts offering 'additional / optional / independent courses' such as preparation of NDA, IIT, PMT various competitive entrance exam etc. at separate consideration, such additional / optional / independent courses' are not provided by an educational institution to its students (as defined in subject notification). And hence, same not exempted vide Entry no. 66 in my humble view.

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

[Rajesh Kumar]

Dear Experts,

On perusal above replies, final conclusion appears that When 'Education Institution' starts offering 'additional / optional / independent courses' such as preparation of NDA, IIT, PMT various competitive entrance exam etc. at separate consideration, such additional / optional / independent courses' are not provided by an educational institution to its students). And hence, same not exempted vide Entry no. 66.

If all are not agree, please suggest exact solution of the query.

[Amit Agrawal]

Dear Shri Rajesh Kumar Ji,

You got two views - contrary to each other - both explaining own rationale. And there is always possibility that there can be third / many more arguments and finer points of defence etc.

Moreover, eventual outcome of such cases also depend upon type of case put up by Dept. and defence/s put there-against by the assessee.

This is a discussion forum (& not a court which can pronounce its views by way of a verdict, which itself can further be challenged till Supreme Court ... by both sides).

Hence, in my humble view, one should not expect a 'final conclusion' for such complex issues (more so on public platform like this) and same will be eventually decided one way or other by courts ..... probably Apex Court.

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]

Rajesh Sir,

I agree with Ld. Amit Ji. The discussion in this forum only throws light on different views on the issue on hand. There is no conclusive view here. You may kindly analyse the outcomes of different views and take a call.

[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.