1. INTRODUCTION
The Goods and Services Tax (GST) regime in India has provided various exemptions and concessions to different sectors, including the educational sector and allied areas. The GST exemptions for the educational sector have been introduced to reduce the burden of tax on education and promote their development in India. This exemption is related to one of the two major concerns of every citizen of the country, i.e., Education and Health. Even sometimes now, in our country free education and health facilities are demanded, though it would be difficult for the exchequer to bear this burden now.
Somehow or the other, exemptions under GST create bottlenecks and restrict the free flow of input tax credit and consequently generate cascading. When a particular outward supply is exempted, then input tax credit accumulated over all inward supplies received to provide such exempt supply would not be available as credit, thereby making all such credit as cost and results in cascading. In this article, we will discuss the exemptions given to the educational sector and healthcare sector under GST.
Exemptions are always read and construed very strictly and need to comply each and every condition provided to avail any such exemption. In case of any doubt, benefit of such doubt shall be always given to revenue and exemption may be denied to the tax-payer. Therefore, applicability of any exemption should be tested tooth and nail and not be taken loosely.
2. Provisions under GST Act and Discussions
2.1 Section 9 of the CGST Act, 2017 talks about levy of GST
there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent, as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.
Section 11 of the CGST Act, 2017,
where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification.
Here we can see that there could be two types of exemptions. One is absolute exemption for availment to which no condition or averment attached. Second type is conditional which it-self suggests that availment is dependent upon the fulfilment of certain conditions.
In exercise of the powers conferred by section 9 and Section 11 of the Act, the Central Government, on the recommendations of the Council vide Notification No. 12/2017-Central Tax (Rate)(CTR), dated 28-6-2017, exempts the intra-State supply of below mentioned services: —
2.2 Exemptions given to the Educational Sector: Entry No. 66 of Notification No. 12/2017-CTR
Services provided—
(a) by an educational institution to its students, faculty and staff;
(aa) by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee;
(b) 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 Central Government, State Government or Union territory;
(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;
(v) supply of online educational journals or periodicals:
Provided that nothing contained in sub-items (i), (ii) and (iii) of item (b) shall apply to an educational institution other than an institution providing services by way of preschool education and education up to higher secondary school or equivalent:
Provided further that nothing contained in sub-item (v) of item (b) shall apply to an institution providing services by way of, —
- pre-school education and education up to higher secondary school or equivalent; or
- education as a part of an approved vocational education course.
It is evident from the first proviso that services provided to an educational institution relating to transportation, catering and security, cleaning and house keeping shall only be exempt if received by an institution providing services by way of preschool education and education up to higher secondary school or equivalent and not to colleges or universities or other educational institutions.
Second proviso also restricting the application of the entry. With regard to supply of online educational journals or periodicals, no exemption shall be provided if these inward supplies are received by institution providing services by way of, —
- pre-school education and education up to higher secondary school or equivalent; or
- education as a part of an approved vocational education course.
2.3 Whether exemption available to sub-contractor on services provided to educational institutional on behalf of main contractor?
In order to dwell upon this question, let us travel to another exemption entry available under Notification No. 12/2017-CTR.
Another Exemption entry relevant to education sector-Entry no 22(c) of Notification No. 12/2017-CTR
Services by way of giving on hire
motor vehicle for transport of students, faculty and staff, to a person providing services of transportation of students, faculty and staff to an educational institution providing services by way of pre-school education and education up to higher secondary school or equivalent.
This entry no. 22(c) is relating to sub-contracting of transport facility to students, faculty and staff by any person to a person who in turn provides such services to educational institution. For instance, Ms. Bus is providing transport services for faculty, staff and students of M/s Bhagwat Gita Education School. In turn Ms. Bus is taking services for such activity from Ms. Matador. Now, Services by Ms. Bus to M/s Bhagwat Gita Education School is exempt due to the application of entry no. 66 of the Notification No. 12/2017-CTR. And services from Ms. Matador to Ms. Bus is of back to back sub-contracting services, which is expressly provided to be exempt by way of entry no. 22(c) of the Notification No. 12/2017- CTR.
Exemptions are available only on the specific inclusion or exclusion in the entry. Therefore, only this sub-contracting activity shall be exempt and none other as we can read only what is written.
2.4 Applicable Definitions: –
a) What do you mean by education institutional?
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 recognized by any law for the time being in force;
(iii) Education as a part of an approved vocational education course.
Sub-clause (ii) covers institutions providing services by way of education as a part of curriculum for obtaining a qualification recognized by any law for the time being in force. Here under this sub-clause, there has to be a qualification under an organised curriculum which leads to a degree given by colleges, universities or institutions which is recognised by any law in the country. If training is given by any private coaching institute for preparing for any course provided by educational institutions then such activity shall be taxable.
For removal of doubts, it is clarified that any authority, board or body set up by the Central Government or State Government including National Testing Agency for conduct of entrance examination for admission to educational institutions shall be treated as educational institution for the limited purpose of providing services by way of conduct of entrance examination for admission to educational institutions.
b) What is Approved Vocational Education Course?
An “approved vocational education course” means,
(i) A course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training or State Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961 (52 of 1961); or
(ii) A Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Training, Ministry of Skill Development and Entrepreneurship.
2.5 Educational Institution run by charitable organizations – GST Implication
Under GST era, definition of charitable activities and exemption for charitable organisation is different and changed. First of all, we should be aware of the exemption available for charitable entities.
Entry no. 1 gives following exemption-:
Services by an entity registered under section 12AA or 12AB of the Income-tax Act, 1961 (43 of 1961) by way of charitable activities.
So, any entity registered under section 12AA or 12 AB of the Income-tax Act, 1961 and involved under Charitable activities shall be exempt for such services provided. Let us understand now, what does charitable activities mean under GST-:
“charitable activities” means activities relating to—
(i) public health by way of,—
(A) care or counselling of
(I) terminally ill persons or persons with severe physical or mental disability;
(II) persons afflicted with HIV or AIDS;
(III) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or
(B) public awareness of preventive health, family planning or prevention of HIV infection;
(ii) advancement of religion, spirituality or yoga;
(iii) advancement of educational programmes or skill development relating to,—
(A) abandoned, orphaned or homeless children;
(B) physically or mentally abused and traumatized persons;
(C) prisoners; or
(D) persons over the age of 65 years residing in a rural area;
(iv) preservation of environment including watershed, forests and wildlife;
As per this definition, exemption for educational activity is only restricted to advancement of educational programmes or skill development relating to abandoned, orphaned or homeless children or physically or mentally abused and traumatized persons or prisoners or persons over the age of 65 years residing in a rural area.
This can be evidently seen that exemption to entities involved in charitable activities is very limited w.r.t. educational programmes.
Therefore, if charitable trusts run schools or colleges or other educational institutions then they can avail exemption provided in the Entry No. 66 of Notification No. 12/2017-CTR.
2.6 Here it is relevant to note another exemption relating to educational programme – Entry no. 74A from Notification No. 12/2017-CTR.
Services provided by rehabilitation professionals recognised under the Rehabilitation Council of India Act, 1992 (34 of 1992) by way of rehabilitation, therapy or counselling and such other activity as covered by the said Act at medical establishments, educational institutions, rehabilitation centers established by Central Government, State Government or Union territory or an entity registered under section 12AA or 12AB of the Income-tax Act, 1961 (43 of 1961).
Although this entry primarily belongs to rehabilitation professionals but it impacts educational institutions also. If a rehabilitation centre is built by an educational institution and such services are provided by rehabilitation professionals to such educational institutions then those would be exempt services as per this entry.
Conclusion
Under Indirect tax regime, burden to collect tax and incidence to pay tax is on two different persons. Educational Services are largely consumed by the future generations and incidence also is on their shoulders only. Therefore, every society is under duty bound to either create such resources for the citizens to afford any price for indispensable services of education or provide services with affordability of the masses. In country like Bharat, we have massive population to educate and that only can bring the dream of Honourable Prime Minister Sh. Narendera Modi’s dream of $ 5 Trillion Bhartiya Economy true. Author is extremely optimist with the potential of the population of our country. If par excellence education at affordable price and world class research facility is provided to our talent then menace of brain drain also can be curbed.
The author can be reached at gstrfbharat@gmail.com His Mobile no. is +91-9891112120.
DISCLAIMER: This publication is merely a general guide meant for knowledge purposes only. All the references or content are for educational purposes only and do not constitute legal advice. We do not accept any liabilities whatsoever for any losses caused directly or indirectly by the use/reliance of any information or conclusion contained in this publication. Prior to acting upon this publication, you’re suggested to seek advice. This work is entirely in the interest of the profession and to contribute to my beloved subject GST.
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