In re CAE Simulation Training Private Limited (GST AAR Uttar Pradesh)
The ruling addresses the question of whether the supply of education and training services to commercial pilots, in accordance with the approved training curriculum by the Directorate General of Civil Aviation, falls under the exemption provided by specific notifications.
The applicant seeks a ruling on the applicability of certain notifications and the liability to pay tax on their education and training services. The AAR finds that the issue raised falls under Section 97(2) of the CGST Act and admits the application for consideration.
The AAR scrutinizes the notifications in question, specifically Sl. No. 66 (a) of Notification No. 12/2017-Central Tax (Rate) and Sl. No. 66 (a) of Notification No. A.NI.-2-843/XI-9(47)/ 17- U.P. Act-1-2017-Order- (10) -2017. The relevant excerpts from these notifications are analyzed to determine the scope of exemption for educational services.
The ruling highlights that the applicant’s training courses do not result in the provision of a recognized qualification as defined by the University Grants Commission Act 1956. The extension of aircraft type ratings on pilots’ licenses is considered skill enhancement rather than a new qualification or degree.
The AAR further emphasizes that the applicant does not issue licenses, diplomas, or certificates but rather prepares trainees for examinations conducted by the Directorate General of Civil Aviation (DGCA). The statutory requirement lies in passing the DGCA’s examinations, and the applicant’s training is meant to facilitate this process.
Additionally, the AAR clarifies that the completion of the training course does not directly lead to employment as a pilot. The DGCA’s endorsement of aircraft ratings on the pilot’s license is necessary for eligibility in seeking employment. Merely completing the training without the endorsement does not enable pilots to fly aircraft or secure employment.
Based on the analysis, the GST AAR ruling concludes that the supply of education and training services to commercial pilots, according to the approved training curriculum by the DGCA, is not exempted under the specified notifications. The ruling states that the training provided does not qualify as education leading to a recognized qualification under the relevant laws.
Read AAAR Order: GST on Education Services for Commercial Pilots’ License Extension Training
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, UTTAR PRADESH
1. M/s CAE Simulation Training Private Limited, Sector KP-III, 25/3,Gautam Budh Nagar, Greater Noida, Uttar Pradesh — 201306 (here in after referred to as the applicant) is a registered assessee under GST having GSTIN: 09AAECC7113K1ZL.
2. The applicant has submitted an application for Advance Ruling dated 05.09.2022 enclosing dully filled Form ARA-01 (the application form for Advance Ruling) along with annexure and attachments. The applicant in his application has sought advance ruling on following question-
“Whether the supply of education and 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 28.6.2017 and Sl. No. 66 (a) of the Notification No. A.N1-2-843/X1-9(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 & Uttar Pradesh Goods and Service Tax.”
3. As per declaration given by the applicant in Form ARA-01, the issue raised by the applicant is neither pending nor decided in any proceedings under any of the provisions of the Act, against the applicant.
The applicant has submitted that-
3.1 Applicant is a group company of Inter Globe Enterprises Private Limited (“hereinafter referred to as Inter Globe”), which is engaged in the business of facilitating the training of commercial pilots on the Aircraft Simulators installed at its training facilities. Such training is provided in accordance with the training curriculum approved by the Directorate General of Civil Aviation (hereinafter referred to as “DGCA”) for obtaining the extension of aircraft type ratings (hereinafter referred to as “ATRs”) on their existing licenses.
3.2 Under Section 5(2)(g) and (o)’ of the Aircraft Act, 1934 (hereinafter referred to as “Aircraft Act”), 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 such licenses. In pursuance of Section 5 of the Aircraft Act, the Aircraft Rules, 1937 (hereinafter referred to as “Aircraft Rules”) have been notified.
3.3 Further, Section 5A (1)2 of the Aircraft Act empowers the DGCA to issue directions in respect of the topics covered under Section 5(1) of the Aircraft Act. It is understood that Section 5A of the Aircraft Act read with Rule 133A(1)3 of the Aircraft Rules have empowered the DGCA to issue the Civil Aviation Requirements (hereinafter referred to as “CARs”).
3.4 Rule 41B4 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. Other approved training organisations (hereinafter referred to as “ATOs”) can be set up under Rule 133B5 of the Aircraft Rules, for all aviation subjects, except for those covered under Rules 41B and 114 of the Aircraft Rules.
3.5 Rule 66 of the Aircraft Rules provides that every aircraft shall carry and be operated by licensed personnel, as provided in Part V read with Schedule II to the said Rules, and Rule 387 of Part V of the Aircraft Rules enumerates the list of licenses and ratings that can be issued by the Government of India.
3.6 Further, Rule 6A8 provides that no person shall fly as pilot of an aircraft, which is not included in the aircraft rating of his license.
3.7 Furthermore, Rule 419 of the Aircraft Rules provides that the applicants for licences and ratings shall produce proof of having acquired the flying experience and having passed satisfactorily the test and examinations specified in Schedule II in respect of the licence or rating concerned.
3.8 Sub-section 4 of Section J of Schedule II to the Aircraft Rules provides that a licence shall indicate the types of aircrafts the holder is entitled to fly in the form of aircraft ratings, and sub-section 5 provides for the extension of such aircraft rating to include an additional type of aircraft 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.
3.9 For making an application for the extension of ATR, the following documents need to
be submitted by the applicant:
a. Duly certified logbook 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, each.
3.10 Thus, 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 and the pilots holding the Commercial Pilot License (CPL(A)) have to mandatorily undergo the ATR 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 particular aircrafts that such airlines fly in the ordinary course of business.
3.11 In order to standardize and streamline the process, Civil Aviation Requirement (hereinafter referred to as ‘CAR’) has been issued under the provisions of Rule 29 C and Rule 133A of the Aircraft Rules, 1937 which provides the basic guidelines for pilots to undertake endorsement training in various Type Rated Training Organization (TRTO) / Approved Training Organisation (ATO) for Scheduled, Non-Scheduled and General Aviation Operations. CAR lays down the rules governing the initial and continuing qualification and use of all aircraft Synthetic Flight Training Devices (FTD) levels 4, 5, and 6 and Full Flight Simulators (FFS) levels A, B, C and D used for meeting training, evaluation, or flight experience requirements for flight crewmember training, certification or qualification.
3.12 Applicant is an ATO in Noida, Uttar Pradesh, wherein ATR training courses are provided to pilots who are already holding their CPL(A), as per the DGCA approved syllabus and training manual, to independent pilots.
3.13 The ATR training programme provided by the Applicant involves the phases of ground school, and flight simulation training in respect of the particular aircraft(s) for which the ATR is to be applied for.
3.14 For supply of ATR training, the Applicant entered into the Flight Training Services Agreement (“Agreement”) with its trainees. This Agreement provides that it is entered into by the trainee for professional purposes, and it prescribes the fees to be paid by them to the Applicant for the said training programme.
3.15 After completing the training with the Applicant, the pilots have to undertake skill tests and checks, and thereafter, they have to file an application for the extension of ATR, and as discussed in the foregoing paragraphs, the documents required to be submitted with the said application have to be issued by the ATO from where the applicant pilot has completed the ATR training.
3.16 The agreements with the trainees are still continuing and would continue to supply these services in the coming years.
4 The applicant has submitted their interpretation of law as under-
4.1 In the understanding of the Applicant, as referred in the facts above, the Applicant is an ATO approved by the DGCA and is engaged in supply of ATR training to commercial pilots in accordance with the training curriculum approved by the DGCA for obtaining the extension of aircraft type ratings on their existing licenses, and therefore, would be covered under Si. No. 66 (a) of the Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017 (hereinafter referred to as ‘Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017‘) and Si. No. 66 (a) of the Notification No. A.NI.-2-843/XI-9(47)/ 17- U.P. Act-1-2017-Order- (10) -2017 dated 30.6.2017 (hereinafter referred to as `Notification dated 30.6.2017′), and thereby, exempted from levy of Central Goods and Service Tax & Uttar Pradesh Goods and Service Tax (hereinafter collectively referred to as `GST’).
APPLICABLE PROVISIONS OF THE CGST ACT Levy of GST
4.2 Section 9(1) of the CGST Act is the charging section levying Central Goods and Service tax (for short ‘Central tax’ or `CGST’) 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 of the CGST Act.
4.3 The term ‘supply’ has been given meaning under Section 7 of the CGST Act to include –
a. all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
b. import of services for a consideration whether or not in the course or furtherance of business.
c. the activities specified in Schedule I, made or agreed to be made without a consideration; and
d. the activities to be treated as supply of goods or supply of services as referred to in Schedule II.
4.4 Section 2(102) of the CGST Act, defines “services” as anything other than goods, money and securities. With the wide ambit given to the meaning of services under the GST law, it can be said that the education and training provided by Applicant are in the nature of services, and where such services are supplied in exchange for fees payable by the trainees, there is a supply in terms of the scope prescribed in the GST law.
4.5 Reference is drawn 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 certificatesand 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″
4.6 Further reference has to be made to the Notification No. 11/2017 — Central Tax (Rate) dated 28.06.2017 (hereinafter referred to as “Notification No. 11/2017 — Central Tax (Rate) dated 28.06.20177″), Notification No. KA.NI.-2-842/XI-9(47)/ 17- U.P. Act-1-2017-Order- (09) -2017 dated 30.6.2017 (hereinafter referred to as ‘state rate notification’), the Notification No. 12/2017 and Notification dated 30.6.2017.
4.7 The relevant entry of the Notification No. 11/2017 — Central Tax (Rate) dated 28.06.2017 is produced hereunder:
