Educational Institutions and Charitable Entities U/S 12AA Under GST

Educational Institutions Under GST

As per  Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, Educational Institution means an institution providing services by way of:

1. Pre-school education and education up to higher secondary school or equivalent;

2. Education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;

3. Education as a part of an approved vocational education course

As per  Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, 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.

The rates of GST on education services (as per Notification No. 11/2017-Central Tax (Rate) and Notification No. 12/2017-Central Tax (Rate) all dated 28.06.2017) are as below:

Chapter / Section / Heading	Description of Service	Rate / Notification
9992	Education Services	18% ( 9% Central Tax + 9% State Tax)/ Serial No. 30 of Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017
9992	Services provided – (a) by an educational institution to its students, faculty and staff; (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 housekeeping services performed in such educational institution; (iv) services relating to admission to, or conduct of examination by, such institution; up to higher secondary: Provided that nothing contained in entry (b) shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent	NIL / Serial No. 66 of Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017
9992	Services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programmes, except Executive Development Programme: – (a) two year full time Post Graduate Programmes in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT) conducted by the Indian Institute of Management; (b) fellow programme in Management; (c) five year integrated programme in Management.	NIL / Serial No. 67 of Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017
90 or any chapter	Technical aids for education, rehabilitation, vocational training and employment of the blind such as Braille typewriters, braille watches, teaching and learning aids, games and other instruments and vocational aids specifically adapted for use of the blind Braille instruments, paper etc.	5% of Schedule I of the Notification No.1/2017-Central Tax (Rate) dated 28th June, 2017
9023	Instruments, apparatus and models, designed for demonstrational purposes (for example, in education or exhibitions), unsuitable for other uses	28 % of Schedule IV of the Notification No.1/2017-Central Tax (Rate) dated 28th June, 2017

So in view of the above,

1.Conduct of degree courses by colleges, universities or institutions which lead grant of qualifications recognized by law would be exempted from GST.

2. Training given by private coaching institutes or other unrecognised institution or self styled educational institution would not be exempted as such training does not lead to grant of a recognized qualification since private institute does not have any specific curriculum. (Recently held the same in Simple Rajendra Shukla (AAR Maharashtra 2018) and tax rate shall be 18%,the same was also confirmed in FAQ released by CBIC.)

3. Services provided by way of education as a part of a prescribed curriculum for obtaining a qualification recognized by a law of a foreign country are also not exempted because the course / degree not recognized by Indian Law.

4. Auxiliary education services (such as transportation of students faculty staff ,catering ,security ,cleaning ) entry no 66 of Notification No. 12/2017 of Central Tax Rate DT: 28.06.2017, if provided to educational institutions providing degree or higher education, the same would not be exempt from GST.

Following are not Exempt from GST:

• Supplies provided by third parties like the musical instrument, computers, sports equipment,
• After school activities offered directly by third parties,
• Food and accommodation supplied for the excursion as described above,
• Uniform, stationery, and other non-academic related supplies.
• Service of renting of immovable property to educational institutions.
• Services of Banking to educational institutions.
• Constructions Services provided to educational institutions.
• Services of Educomp Smart Class, Video conferencing provided to educational institutions.
• Advertisement Services provided to educational institutions.
• Placement Services for securing job placements for the students provided to educational institutions.
• If the educational institutions run summer camp or coaching classes for other students apart from the school students.
• If the educational institutions rent the school premise for marriage and other functions.
• The educational institutions charge a fee from prospective employers like corporate houses/ MNCs, who come to the institutes for recruiting candidates through campus interviews in relation to campus recruitments ,such placement services are liable for GST.

Some other points to be kept in mind:-

• Apparently, services provided by an Educational Institution are exempt from GST, but, when services are supplied to an Educational Institution, exemption is restricted only for specified services(transportation of students faculty staff ,catering ,security ,cleaning ) and that to only for pre-school and higher secondary.

• Output services of lodging/boarding in hostels provided by educational institutions which are providing pre-school education and education up to higher secondary school or equivalent or education leading to a qualification recognised by law, are fully exempt from GST. Annual subscription/fees charged as lodging/ boarding charges by such educational institutions from its students for hostel accommodation shall therefore, not attract GST.

• It may be noted that where output services are exempted, the Educational institutions may not be able to avail credit of tax paid on the input side. The four categories of services known as Auxiliary Education services, which educational institutions ordinarily carry out themselves but may obtain as outsourced services from any other person, have been exempted (as per Notification No. 12/2017- Central Tax (Rate)). Auxiliary education services other than what is specified above would not be entitled to any exemption. Such services are exempt only for educational institutions providing services by way of education upto higher secondary or equivalent.Thus if such auxiliary education services are provided to educational institutions providing degree or higher education, the same would not be exempt.

• Charitable Trusts running institutions conforming to the definition of Educational Institution as specified in the notification would be entitled to the exemptions discussed above. Apart from the general exemption available to all educational institutions, charitable activities of entities registered under Section 12AA of the Income Tax Act is also exempt ( which is discussed below separately ). The term charitable activities are also defined in the notification( which is discussed below separately ). Thus, if trusts are running schools, colleges or any other educational institutions or performing activities related to advancement of educational programmes specifically for abandoned, orphans, homeless children, physically or mentally abused persons, prisoners or persons over age of 65 years residing in a rural area, activities will be considered as charitable and income from such services will be wholly exempt from GST in terms of Notification No.12/2017- Central Tax (Rate) dated 28th June, 2017.

• Some of the input services like canteen, repairs and maintenance etc. provided by private players to educational institutions were subject to service tax in pre-GST era and the same tax treatment has been continued in GST regime.

• Boarding schools provide service of education coupled with other services like providing dwelling units for residence and food. This may be a case of bundled services if the charges for education and lodging and boarding are inseparable. Their taxability will be determined in terms of the principles laid down in section 2(30) read with section 8 of the CGST Act, 2017. Such services in the case of boarding schools are naturally bundled and supplied in the ordinary course of business. Therefore, the bundle of services will be treated as consisting entirely of the principal supply, which means the service which forms the predominant element of such a bundle. In this case since the predominant nature is determined by the service of education ,the other service of providing residential dwelling will not be considered for the purpose of determining the tax liability and in this case the entire consideration for the supply will be exempt. If an artificial bundle of service is created by clubbing two courses together, only one of which leads to a qualification recognized by law, then by application of the rule of determination of taxability of a supply which is not bundled in the ordinary course of business, it shall be treated as a mixed supply as per provisions contained in section 2(74) read with section 8 of the CGST Act, 2017. The taxability will be determined by the supply which attracts highest rate of GST on entire consideration. So in such case of provision of dual qualifications is in the nature of two separate services it is advisable that the curriculum and fees for each of such qualifications are prescribed separately. Service in respect of each qualification would, therefore, be assessed separately.

• As per the CBIC Vide Press Release dated July 13, 2017, services of lodging/boarding in hostels provided by such educational institutions which are providing pre-school education and education up to higher secondary school or equivalent or education leading to a qualification recognised by law, are fully exempt from GST. Annual subscription/fees charged as lodging/boarding charges by such educational institutions from its students for hostel accommodation shall not attract GST.

GST on supply of food and drinks in Educational Institutions.

The Government of India Vide as per Circular No. 28/02/2018-GST Dated: 08.01.2018, clarified that supply of food or drink provided by a mess or canteen is taxable at 5% without Input Tax Credit [Serial No. 7(i) of Notification No. 11/2017-Central Tax (Rate) as amended vide Notification No. 46/2017-Central Tax (Rate) dated November 14, 2017]. It is immaterial whether the service is provided by the Educational Institution itself or the Institution outsources the activity to an outside contractor.

MY VIEW :-

• In my opinion, this Circular No. 28 contradicts with S.No. 66 clause (a) of Notification No. 12/2017 of Central Tax Rate Dated: 28.06.2017, which exempts services provided by an Educational Institution to its students, faculty and staff. Further clause (b) of the said Notification exempts certain services ( like transportation of students faculty staff ,catering ,security ,cleaning etc ) .
• Since such mess or canteen facilities provided by the Educational Institutions are incidental for the provision of principal activity of education services and such charges often included in the fees charged to the students forming the natural bundle ( provision of education activity as principal services ) , thus it should be eligible for exemption with reference to S.no. 66 Clause (a) of Notification No. 12/2017 of Central Tax Rate DT: 28.06.2017, as services provided by Educational Institutions to students , faculty and staff is exempted here.
• In case where mess facility is outsourced to outsider then clause (b) of S.no. 66 of the said Notification No. 12/2017 comes to play which exempts catering services provided to educational institutions (only upto pre school and higher secondary school ). Further CBIC Vide Press Release DT: 13.07.2017, had exempted the lodging/boarding in hostels services provided by educational institutions.
• In the view of above, in my opinion this Circular No. 28 DT: 28.01.2018 should be non-est , bad in law issuing contradictory circulars and should not be followed.

Charitable Institutions U/S 12AA Under GST

The rates of GST on entities registered U/s 12AA of Income Tax Act 1961, (as per Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and as per Notification No.09/2017- Integrated Tax (Rate) Dated: 28.06.2017) are as below:

Chapter / Section / Heading	Description of Service	Rate / Notification
Chapter 99	Services by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) by way of charitable activities.	NIL / Serial No. 01 of Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017
Heading 9963 or Heading 9972 or Heading 9995 or any other Heading of Section 9	Services by a person by way of- (a) conduct of any religious ceremony; (b) renting of precincts (boundaries ) of a religious place meant for general public, owned or managed by an entity registered as a charitable or religious trust under section 12AA of the Income-tax Act, 1961 (hereinafter referred to as the Income-tax Act) or a trust or an institution registered under sub clause (v) of clause (23C) of section 10 of the Income-tax Act or a body or an authority covered under clause (23BBA) of section 10 of the said Income-tax Act: Provided that nothing contained in entry (b) of this exemption shall apply to,- (i) renting of rooms where charges are one thousand rupees or more per day; (ii) renting of premises, community halls, kalyanmandapam or open area, and the like where charges are ten thousand rupees or more per day; (iii) renting of shops or other spaces for business or commerce where charges are ten thousand rupees or more per month.	NIL / Serial No. 13 of Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017
Heading 9996	Services by way of training or coaching in recreational activities relating to- (a) arts or culture, or (b) sports by charitable entities registered under section 12AA of the Income-tax Act.	NIL / Serial No. 80 of Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017
Chapter 99	Services received from a provider of service located in a non- taxable territory by – (a) the Central Government, State Government, Union territory, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession;  (b) an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) for the purposes of providing charitable activities; or (c) a person located in a non-taxable territory: Provided that the exemption shall not apply to – (i) online information and database access or retrieval services received by persons specified in entry (a) or entry (b); or (ii) services by way of transportation of goods by a vessel from a place outside Nil Nil 5 India up to the customs station of clearance in India received by persons specified in the entry	NIL / Serial No. 10 of Notification No. 09/2017- Integrated Tax (Rate) dated 28th June, 2017

As per  Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, “Chartitable Activities” means activities relating to –

(i) public health by way of ,-

(A) care or counseling 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;

Some points to be kept in mind:-

• Goods that are sold by charitable trust is fully taxable under GST and trust should also pay GST on inward supply of goods, provided goods are not specifically exempted under GST Act 2017.

• If a charitable trust is conducting training programs, yoga camps, or other programs that are not free for participants, it will be considered as a commercial activity and hence will be liable for GST. Even the donation received for such an activity will be liable for taxation under GST.

• Immovable properties owned by charitable trusts like marriage hall, convention hall, rest house for pilgrims, shops situated within the premises of a religious place are rented out, income from letting out of such property is exempt from GST. However, this exemption will not be available if charges for renting of rooms exceed 1000 per day or charges for renting of premises/kalyanamandapam etc exceed 10,000 per day or renting of shops/premises for business purposes exceed 10,000 per month. So also, if such properties are not situated in the precincts of a religious place meaning thereby not within boundary walls of the religious place, income from such letting out will lose this exemption and income from it will be liable to GST.

• It should be noted that all income from charitable trust are exempt under GST. For example if trust gives their immovable property for advertisement then such income from advertisement received shall be liable for GST . So be careful with income of trust, if trust’s income loses the nature of religious/charitable then such income shall be chargeable to GST.

CONCLUSION

Education is fundamental to the nation building process. Right to Education is now a fundamental right of every child in India. GST Law recognises this and provides exemption to educational institutions, providing education up to higher secondary school or equivalent from the levy of GST. So, services provided by an educational institution to students, faculty and staff are exempt. The output services of lodging/boarding in hostels provided are fully exempt from GST. Auxiliary services received by such educational institutions for the purpose of education up to Higher Secondary level is also exempt from GST. Other services related to education, not covered by the exemption, would be taxed at a standard rate of 18% with full admissibility of ITC for such taxable services in cases where the output service is not exempt.