Amit Mundhra, FCA, ISA(ICAI)
In this article I am discussing the Service tax provisions in respect to the Services provided TO the Educational Institutions.
An illustrative list of services provided to Educational Institutions
I am examining the service tax implications on above services provided to educational institutions.
First of all, let’s discuss the most specific entry relating to services provided to Educational Institution appearing at point no. 9 of Mega Exemption Notification.
POINT NO. 9 OF MEGA EXEMPTION NOTIFICATION
An Educational Institution
In respect of
Exempted from Service Tax
By Way of
(i) Auxiliary Educational Services
(ii) Renting of Immovable Property
“Auxiliary Educational Services”
Point No. (f) of the Definitions part of Mega Exemption Notification defines “Auxiliary Educational Services” as under
“Auxiliary Educational Services”
any services relating to imparting
Any skill, knowledge, education or development
or any other
knowledge – enhancement activity,
whether for the students or the faculty,
other services which educational institutions ordinarily carry out themselves
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,
transportation of students, faculty or staff of such institution;
Section 65B(41) of the Finance Act defines “Renting” as
“renting” means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property.
Reference to this point no. 9(i) of mega exemption notification is required in examining the taxability of all kinds of services provided to educational institutions. If we now look at the list of services provided to educational institution as above, the following analysis can be drawn.
Nature of Services Provided to Educational Institution
Covered in Auxiliary Educational Services
Can be said to be provided “in respect of education”
Availability of Exemption under Point No. 9(i) of Mega Exemption Notification
Works Contract Services
Placement Agency Services
Supply of Manpower Services
*here it is to be noted that above services may be exempted under any other point of mega exemption notification which are being discussed separately.
Clause (ii) of point no. 9 of Mega Exemption Notification
Renting of Immovable Property Service
An educational institution may use Renting Service from other persons. Applicability of service tax in such case may be examined under following points.
Now, let’s discuss the other specific exemption available in respect of various services provided to the educational institutions.
Works Contract Services
An educational institution may use works contract services from external agency for construction of building and any other works for setting up an institution. I have discussed exemption available to service provided under Works contract services in detail in my previous article which you can read by following this link. (Click Here). However, following points needs to be considered for determining taxability of works contract services provided to an educational institution.
As I have discussed above, though the transportation services are covered under the term “auxiliary education services”, it cannot be said to be provided “in respect of education” and hence exemption under point 9(i) of Mega Exemption Notification will not be available.
However, point no. 23 of Mega Exemption Notification covers this point. This point I have discussed in my previous article in detail. Follow this link (click here) and search “Transportation” on this article.
Point No. 23(ii) reads as; Transport of passengers with or without accompanied belongings by (ii) a contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire;
An educational institution may use own vehicles or may use services from external service provider for transportation of students and staff. There may be following models in such arrangements.
An educational institution may use services of a horticulturists/ gardeners for cultivation and up keeping of gardens and plants.
As per Section 66D(d) “Negative List of Services” following entry appears.
Services relating to agriculture or agricultural produce
By way of
i. Agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing.
iv. ………….. to viii
Definition of relevant terms
Section 65B(3) defines “Agriculture” as
“agriculture” means the cultivation of plants and rearing of all life-forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products
Section 65B(5) defines “Agriculture Produce” as
“agricultural produce” means any produce of agriculture on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market.
The meaning of term “Agriculture” is very wide. Department in its clarification has also provided that following are also included within the ambit of term agriculture.
According to Webster’s dictionary the term “horticulture” means “the art or science of growing flowers, fruits, vegetables and shrubs, especially in gardens or orchards.”
Thus it is quite clear that the horticulture is covered under the term agriculture and services in relation of agriculture and agricultural produce are covered under negative list and hence not taxable.
I have tried to compile the provisions of Negative List and Mega Exemption Notification which are relevant to services provided to the Educational Institutions. Such provisions need to be thoroughly examined for determining the service tax liability on services provided to the educational institutions.
Amit Mundhra, FCA
Author is a member of ICAI and can be reached at email@example.com
Disclaimer: The views express here in above are based on author’s interpretation of law, which may differ from case to case and person to person. Views expressed above are neither intended nor liable to be used as professional advice or a legal opinion in any manner. The author or publisher is not responsible for the result of any action taken on the basis of this work or for any error or omission to any person.