Educational and Training Services

ARA, Rajasthan has pronounced judgment on 25.10.2021, in the case of Rahul Goyal, (2021) 36 J.K.Jain’s GST & VR 419, that;

‘The Services provided by the applicant to Mentors Eduserv, Bihar on “Principal to Principal” basis per Clause 13 of the agreement dated 10.2.2020 does not constitute employee-employer relation. As such, these Services are not be covered under entry 1 of Sch.III, GST Act & liable to tax u/s 9, GST.’

1. Background.─The applicant was providing Educational and Training Services to M/s Mentors Eduserv, Bihar and were paying tax under category of Other Educational and Training Services under HSN 999294 of chapter 99 of the tariff code which are taxable @18%.

The applicant wants to know whether the services under consideration will be covered under entry 1 of schedule III of RGST/ CGST Act or not.

The relevant clause of the agreement dated 10.2.2020, contains terms and conditions as stipulated in Clause 13, which is reproduced below:

Clause 13‒Miscellaneous Provisions─“13.1 No Agency: This agreement is entered into on a “principal to Principal” basis and the parties are independent of each other, and nothing contained herein is intended to or shall be deemed to create any partnership, joint venture, employment or relationship of principal and agent between the parties hereto or between the First Party and Service Provider”.

2. Findings & Analysis by ARA.─On gone through the above clause of the agreement, the ARA found that the contract has been entered into on a “principal to principal” basis and there is no scene in respect of any employment. Hence, it can be said that there no Service is provided by an employee to the employer in the course of or in relation to any employment in the instant case. Thus, the provisions of entry no. 1 of Sch.III of the GST Act are not applicable.

3. Conclusion by ARA.─ The ARA concluded that;

*Schedule I of the GST Act deem every transaction between the related or distinct person as a supply, even if there is no consideration.

*Schedule III of the GST Act excludes the supply by an employee to the employer from the GST scope. It deems it as no supply.

* In the instant case, the applicant intends to provide Educational and Training Services to its service recipient i.e., M/s Mentors Eduserv on the basis of Clause 13 of the agreement dated 10.2.2020. On going through the Clause 13 of the agreement, the ARA found that there is no establishment of term employment. Hence, activity or transaction between service provider i.e., applicant and service receiver i.e., M/s Mentors Eduserv does not constitute employee-employer relation. *This activity or transaction is not covered under entry no. 1 of the Schedule III of the Act and resulted in a ‘supply of service’ as per S.7, CGST Act, 2017 and tax will be leviable u/s 9, CGST Act, 2017 and valuation thereof will be done as per S.15, CGST Act, 2017

5. Ruling by ARA.─ The ARA ruled as under;

Question: Whether the services under consideration will be covered under entry 1 of schedule III of RGST/CGST Act or not?

Answer:‒No, services under consideration will not be covered under entry 1 of schedule III of RGST/CGST Act, 2017.