In re CAE Flight Training (India) Private Limited (GST AAR Karnataka)
Whether the supply of the aircraft type rating training services to commercial pilots in accordance with the training curriculum approved by the Directorate General of Civil Aviation for obtaining the extension of aircraft type ratings on their existing licenses would be covered under Sl.No.66(a) of the Notification No.12/2017-Central Tax (Rate) dated 28-06-2017 and Sl.No.66(a) of the Notification No.A.NI.-2-843/XI-9(47)/17-U.P.Act-1-2017-Order-(10)-2017 dated 30-06-2017, and thereby, exempted from levy of Central Goods and Service Tax and Karnataka Goods and Service Tax?
The supply of the aircraft type rating training services to commercial pilots, in accordance with the training curriculum approved by the Directorate General of Civil Aviation for obtaining the extension of aircraft type ratings on their existing licenses, do not result into a qualification as the applicant imparts training and issues only course completion certificate and thus the impugned services are not covered under SI. No. 66 (a) of the Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017 and thus are exigible to GST under the CGST/ KGST Act 2017.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KARNATAKA
M/s. CAE Flight Training (India) Private Limited (herein after referred to as ‘Applicant’/’CAE’), Sy. No. 26 86 27, IVC Road, Bandaramanahalli Village, Uganawadi Post, Devanahalli Taluk, Bangalore – 562110, Karnataka., having GSTIN 29AADCC1248A1Z5, have filed an application for Advance Ruling under Section 97 of CGST Act, 2017 read with Rule 104 of CGST Rules, 2017 and Section 97 of KGST Act, 2017 read with Rule 104 of KGST Rules, 2017, in FORM GST ARA-01 discharging the fee of Rs.5,000/- each under the CGST Act and the KGST Act.
2. The applicant stated that they are a Directorate General of Civil Aviation (DGCA) Approved Training Organisation (ATO) engaged in the business of providing type rating training on simulators for various fleet of aircraft to the trainees aspiring to obtain licenses and ratings from the DGCA; that the flight training services imparted by the applicant (ATO) enhances the skill and knowledge of trainees.
3. In view of the above, the applicant has sought advance ruling in respect of the following question:-
Whether the supply of the aircraft type rating training services to commercial pilots in accordance with the training curriculum approved by the Directorate General of Civil Aviation for obtaining the extension of aircraft type ratings on their existing licenses would be covered under SI. No. 66 (a) of the Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017 and SI. No. 66 (a) of the Notification No. A.NI.-2-843/Xl-9(47)/ 17- U.P. Act-1-2017-Order- (10) -2017 dated 30.6.2017, and thereby, exempted from levy of Central Goods and Service Tax & Karnataka Goods and Service Tax.
4. Admissibility of the Application :The applicant claimed that the question on which advance rulings has been sought is with regard to “Determination of the liability to pay tax on any goods or services or both” which is covered under Sections 97(2)(e) of the CGST Act 2017 and hence the instant application is admissible.
5. BRIEF FACTS OF THE CASE: The applicant furnishes the following facts relevant to the issue:
5.1 CAE Group (with its ultimate parent company CAE Inc, Canada) has a worldwide presence and is engaged in manufacture and sale of aircraft simulation products, provision of aviation training and services. CAE Group is a world leader in providing simulation and modeling technologies and integrated training solutions for the civil aviation industry, defense forces and healthcare around the globe. CAE Inc. was founded in 1947 and is headquartered in Montreal, Canada. CAE Inc. has the broadest global reach of any simulation and training equipment and services company in the market.
5.2 CAE provides both classroom-based training about the operations of aircraft and cockpit-based training. The training includes both dry as well as wet training. Dry training is training on the simulator, wherein the person undergoing training is able to obtain usage time on the simulator, in order to undertake the necessary simulation exercises on his own accord. Such dry training is to be undergone by all pilots for a minimum of eight hours during a period of six months on a regular basis. On the other hand, wet training is a 35-day type rating training session, wherein classroom as well as cockpit training is provided by CAE’s trainers.
5.3 CAE is currently engaged in providing dry training to the Commercial Pilot License (‘CPL’)holders from various airlines, who have already been type rated for specific aircraft. Under dry training, airline companies are granted the right to use the full flight simulators for scheduled hours, with their pilots training under the guidance of the airline company’s own instructors.
5.4 CAE is also engaged in type rating training to CPL holders who are not employed by any airlines if they approach directly for undergoing this training. CPL holders who are also on the rolls of various airlines on a stipend basis (as a trainee) and whose confirmation depends on getting aircraft-specific type rating certification can approach CAE for undergoing such training. CAE offers pilots the most advanced type rating training, using a practical and operational learning approach
5.5 These training services are provided in accordance with the training curriculum approved by the DGCA to the trainees for obtaining the licenses and ratings specified in Rule 38 of the Aircraft Rules, 1937, and for obtaining aircraft type ratings (hereinafter referred to as “ATRs“) thereafter.
5.6 Under Section 5(2) of the Aircraft Act, 1934, the Central Government has been empowered to make Rules in respect of the licensing of persons engaged in the operation of aircrafts, and the manner and conditions of the issue or renewal of any such licenses. In pursuance of the provision of Section 5 of the Aircraft Act, the Aircraft Rules, 1937 have been notified.
5.7 Further, Section 5A of the Aircraft Act empowers the DGCA to issue directions in respect of the topics covered under Section 5(1) and 5(2). It is understood that Section 5A read with Rule 133A of the Aircraft Rules have empowered the DGCA to issue the Civil Aviation Requirements (hereinafter referred to as “CARs“).
5.8 On the other hand, Rule 4 IB of the Aircraft Rules provides for the setting up of Flying Training Organisations (hereinafter referred to as “FTOs“), which provide training in respect of aircrafts below 5700 kgs all-up-weight (hereinafter referred to as “AUW“), with the approval of the DGCA, and in accordance with a Training and Procedure Manual (hereinafter referred to as “TPM“) and a Quality Assurance Manual approved by the DGCA. Copy of the TPM of the Applicant is enclosed as Annexure-1.
5.9 Further, other ATOs can be set up under Rule 133B of the Aircraft Rules for all aviation subjects except those covered under Rules 41B and 114.
5.10 Moreover, sub-section 4 of Section J of Schedule II to the Aircraft Rules provides that a licence shall indicate the types of aeroplane the holder is entitled to fly in the form of aircraft rating, and sub-section 5 provides for the extension of such aircraft rating to include an additional type of aeroplane in their license, and in order to extend such aircraft rating, the pilot has to make an application to the DGCA for an endorsement in respect of their license.
5.11 For making an application for the extension of ATR, the following documents need to be submitted by the applicant:-
a. Duly certified log book of the applicant;
b. Duly certified training progress statement;
c. Duly certified ATR skill test report;
d. Duly certified Form CA-39, for the preceding six months and for the preceding 12 months.
Sample copies of the documents specified above have been collectively enclosed as Annexure-2.
5.12 The training provided for the extension of ATR can be undertaken only at training organisations approved by the DGCA, and the documents referred to above have to be issued by such an organisation.
5.13 Against this background, it is noted that CAE also operates an ATO in Bengaluru, Karnataka wherein they are providing ATR extension training courses to pilots who are already holding the CPL(A), as per the DGCA approved syllabus and training manual, and in conjunction of various commercial airlines. Copy of the approval issued to the Applicant to operate as an ATO is enclosed as Annexure-3.
5.14 The following phases of instruction are covered in the ATR extension training courses provided by the Applicant, in respect of the ATR extension to the Airbus A320 and the Boeing 737NG:-
a. Ground school, both performance and technical, which is followed with an examination conducted by the Applicant itself;
b. Flight simulation training in respect of the particular aircraft for which the ATR is to be applied for.
5.15 Further, it is notable that the pilots holding the CPL(A) have to mandatorily undergo the ATR extension training for the specific type of aircraft(s) that they will be flying with any commercial airlines, i.e. the pilots cannot fly for any commercial airlines unless they hold the ATR for certain particular aircrafts that they fly in the ordinary course of business.
5.16 After completing the training with the Applicant, the pilots have to file an application for the extension of ATR, and the documents required to be submitted with the said application have to be issued by the ATO where the applicant has undergone the ATR extension training. Sample copies of the course completion certificates/graduation certificates issued by the Applicant have been enclosed as Annexure-4.
The Applicant charges course fee for providing the training Programme.
6. Applicant’s Interpretation of Law:
6.1 DETERMINATION OF THE TAXABILITY OF THE SUPPLY
Relevant legal provisions
Supply
6.2 In order to determine the taxability of the training provided by the Applicant, it is important to examine whether there is a supply under the GST law.
6.3 For this purpose, reference can be made to the scope of supply defined under Section 7(1) of the CGST Act, wherein it has been provided that all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business is a supply.
6.4 Further reference is made to Section 2(102) of the CGST Act, which defines “services” as anything other than goods, money and securities, which provides a wide scope for the term “services” under the GST law.
6.5 Furthermore, the definition of “business” under Section 2(17) states that this term includes “any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit”.
Taxability
6.6 Thereafter, in order to determine the taxability of the said services, reference has to be made to the SAC 999294 under the Explanatory Notes to the Scheme of Classification of Services (hereinafter referred to as “Explanatory Notes”), which has been reproduced hereunder:-
999294 Other education and training services n.e.c.
This service code includes:
i. training for car, bus, lorry and motorcycle driving licences
ii. training for flying certificates and ship licences
iii. computer training services
iv. management training services
v. services provided by music camps, science camps, computer camps and other instructional camps, except for sports
vi. education services not definable by level
This service code does not include:
– services related to literacy programmes for adults, cf. 999220, 999231
– higher education services comparable to the regular education system, cf 99924, 99925
– cultural education services, cf 999291
– education services provided by instructors, coaches, etc., as part of sporting activities, cf. 999292
6.7 Further reference is made to the Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 (hereinafter referred to as “Rate Notification“) and the Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 (hereinafter referred to as “Exemption Notification“).
6.8 The relevant entry of the Rate Notification is produced hereunder:
