GST on Aviation Academic Services for Commercial Pilot License Qualification

Whether the services provided by aviation academics of flying training and education in order for the candidates to get qualified for Commercial Pilot Licence from DGCA exempt from GST or taxable

Under GST law, educational services enjoy exemptions under specific notifications. Notification 12/2017(CTR) lists services exempted from GST, particularly those provided by educational institutions to students, faculty, and staff. This exemption covers various services essential to educational operations.

Relevant extracts from the GST Law

Notification = 11/2017 (CTR) – List of All Services

Notification 12/2017(CTR) – Exempted Services

12/2017-Central Tax (Rate), Sl. No. 66 (a) exempted services provided by an educational institution to its students, faculty and staff.

As per Para 2(y) of the notification no 12/2017(CTR)-dated 28.08.2017 Educational Institution means an institution providing services by way of –

(i) Pre-School education and education upto higher secondary school or equivalent

(ii) education as a part of the curriculum for obtaining a qualification recognized by any law for the time being in force

(iii) education as part of an approved vocational education course

 From the plain reading of the law as reproduced above, it is apparent that for the exemption to be availed, the primary service of the aviation academy must qualify either or both of the following:

• Education as a part of the curriculum for obtaining a qualification recognized by any law for the time being in force; or
• Education as part of an approved vocational education course.

Let us try to examine this question in the light of certain case laws:

Case-Laws in favor of Exemption

• Custom, Excise and Service Appellate Tribunal, M/s Orient Flight School Vs The Commissioner of GST & Central Excise, 7th November 2023.
• Issue 

Training and Education provided by Aircraft Institutes are taxable under GST or not.

• Facts

The appellant is registered as a society under the Societies Registration Act,1816 and is engaged in flight training to students. On intelligence, it was found out that they were providing taxable services via Commercial Training or Coaching Services without obtaining Service Tax Registration and without payment of service tax. Hence, the investigation was undertaken by the Intelligence and Research branch of Chennai Service Commissionerate.

• Observations

The institute is an approved institute by the DGCA to conduct coaching and training the students. The courses are conducted on the basis of curriculum prescribed by DGCA. The training is also imparted on the guidelines issued by DGCA. The courses imparted by the appellant leads to the grant of a certificate/license to fly an aircraft. That license is issued by the statutory authority DGCA.

According to Indian Aircraft Act, 1934 and rules made under that the approval is periodically renewed and covers the whole disputed period also. The institute not only imparts skills to students but also conducts examinations and skill tests based strictly on the syllabus prescribed by DGCA, the results of which are recognized and approved by DGCA.

Furthermore, It was submitted that the candidate who joins the DGCA approved course for obtaining the CPL is first required to undergo a preliminary test for knowing the basic aptitudes by the chief flying instructor, officer approved and authorized by the DGCA for his medical fitness by DGCA. After all the training, a completion certificate is issued to the student approved and recognized by DGCA, a statutory authority exercising statutory powers under the Aircraft Act of 1934 only after this certificate is issued , it leads to the grant of CPL (Commercial Pilot Licence) to the students.

As per show cause notice after 1.6.2012 when negative list was introduced. It was provided that the activity of the appellant is fully covered by clause (1) of Section 66D read as:

(i) Services by way of Preschool education and education upto 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 approved vocational education courses

The rules and the CAR having provided for grant of approval to such institutes and having laid down conditions for grant of such approval and having further provided for relaxation of one year in the minimum practical training required for taking the DGCA examination, have recognized the Course Completion Certificate and the qualification offered by approval Institutes has by the Act, rules and CAR been conferred some value in the eyes of law, even if it be only for the purpose of eligibility for obtaining ultimate approval for certifying repair/maintenance of aircrafts”. ”The CAR distinguish an approved Institute from the unapproved one and a successful candidate from an approved institute would be entitled to enforce the right, conferred on him by the Act, Rules and CAR, to one year relaxation against the DGCA in a court of law. With reference to  Star Aviation Academy Vs CST, Delhi-2018(15) GSTL-342(Tri-Del)The Tribunal held that the Aircraft Maintenance Engineers(AME). Training imparted by an Institute authorized by DGCA and issue of AME basic Course Completion Certificate is valid and recognized by law and therefore the levy of service tax under ‘ Commercial Coaching’ or Training Services’ cannot sustain.

These institutes are not liable to pay service tax under “Commercial Coaching or Training Services”.

• Decision – Exemption under GST will be allowed. Appeals are allowed with consequential reliefs.(Date of hearing – 11.10.2023, Date of decision-07.11.2023, Service Tax Appeal Nos. 40250-40256 of 2022, Final Order nos=40250-40256)

Summarization

From the above CESTAT decision, it is seen that the authority has considered the involvement of DGCA and Law (India Aircraft Act 1934 and rules made thereunder) from inception till end of the activity. The institute is approved by DGCA, the courses and trainings are imparted as per the guidelines of the DGCA, the instructors are DGCA approved and finally the commercial pilot license is issued by DGCA for which the education and training conducted by the appellant is a prerequisite. All of this is done as per the Indian Aircraft Act 1934 and the rules made thereunder.

Hence, the education and training provided by the institute is education as a part of the curriculum for obtaining a qualification recognized by the law for time being in force and hence exempt from GST/Service Tax.

• High Court of Delhi, M/s Indian Institute of Aircraft Engineering Vs Union of India & Others, 21st May 2013
• Issue

Whether the certificate issued would be recognized by law and whether becomes amounts to be assessed for tax

• Facts

The petitioner is an Aircraft Maintenance Engineering Training School approved by the DGCA for providing Aircraft Maintenance Engineering (AME) training and conducting examination as per the course approved by DGCA under Aircraft Act,1934 . The DGCA fully controls the school.

• Observations

The rules and the CAR having provided for grant of approval to such institutes and having laid down  conditions for grant of such approval and having further provided for relaxation of one year in the minimum practical training required for taking the DGCA examination, have recognized the Course Completion Certificate and the qualification offered by such institutes which are without approval of DGCA would not confer the benefit of such relaxation. By way of rules and CAR these degrees and diplomas have been conferred some value. This shows that such institutes are recognized by law.Ex – In the qualification regarding field of law from some years the qualification has been made subject to clearing the Bar exam but that doesn’t make the qualification being ceased to be a qualification in the eyes of law.

• Decision- The High Court held that petitioner, Training Institute is not to be assessed for service tax and assessing the same would be contrary to Section 65(27) and the Notification dated 25th April 2011. So the instruction and show cause notice given to the petitioner is quashed. The rule is made absolute and the writ petition is disposed of(M/S Indian Institute of Aircraft Engineering Vs Union of India & ors, WP(C) No. 3513/2012, Date of Decision-21st May’2013)

Summarization

From this case, we are able to infer specifically that just because there exist some extra or further conditions for the final appearance of examination or for enjoying the vocational benefits of the qualification, does not render it being a qualification not recognised by law. Since the institution providing that education is to be an approved institution by the statutory authority and the education provided by it is a compulsory prerequisite for obtaining the final qualification, the said institutions shall be covered under the definition of the educational institutions required for exemption.

Case-Laws against Exemption

• Appellate Authority for Advance Ruling (AAAR Uttar Pradesh), Interglobe Enterprises Limited, 29th August 2023
• Issue

Whether the appellant qualifies to be an Educational Institution and if so whether they are entitled to the benefit of entry number 66(a) of Notification No. 12/2017 or not

• Facts

The appellant is a group company of Inter Globe Enterprises Limited engaged in the business of facilitating the training of Commercial pilots on the Aircraft Simulators installed at its training facilities according to the syllabus approved by the Directorate General of Civil Aviation in order to obtain the extension of Aircraft Type Ratings on the given licenses.

• Observations

The “ Educational Institution “ for the purpose of this notification means an institution providing services by way of education as part of a curriculum for obtaining a qualification recognized by law for the time being in force. Therefore, an institution becomes an Educational institution only when the services provided by them are ;

(i) Part of the Curriculum

(ii)  the services yield a qualification

(iii) the said qualification must be recognized by law for the time being in force.

The Appellant claimed that though CPL does not per se qualifies the person to fly aircraft but indirectly does because unless the holder undergoes an aircraft specific training  which is called “ type rating training” they cannot sit for examination conducted by DGCA. It was submitted that in legal parlance, qualification does not only mean having degrees and diplomas but acquiring the skills, accomplishments which one acquires through training or education and which confer upon a person the ability to undertake a particular profession or pursuit. Also, in the current case the impugned training program the flying experience provided is required for applying for an ATR extension in terms of Schedule ii of the Aircraft rules.

As regards 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  are not exempted.

• Decision

The Authority for Advance Ruling have held that Impugned services of the Appellant are not covered under entry no 66(a) of the Notification 12/2017 (CTR) do not qualify for exemption from GST. They said that  there is no statutory requirement for the Course Completion Certificate by DGCA and that such a certificate only enables the trainee pilot to apply to DGCA for appearing in the examination conducted by it. In fact this examination conducted by the DGCA is the statutory requirement and not the examination by the appellant. The Appellant is just a coaching institute/preparing the candidates for this Type Rating Examination . The DGCA is not endorsing the licenses of the trainees, on the basis of course completion certificate issued by the Appellant, but conducts separate examination

• Summarization

In this case law, the AAAR says that the training provided by flight schools is only of preparatory nature and does not form part of actual qualification and hence not eligible for exemption.

• Authority for Advanced Rulings (AAR) Karnataka, CAE Flight Training (India) Pvt Ltd, 20th March 2023
• Issue

Whether the classroom based training and cockpit training services provided for Aircraft Type Ratings Extension are taxable or not

• Facts

The CAE group 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 the training on the simulator whereby the person undergoing ongoing 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 , whereby classroom as well as cockpit training is provided by CAE’s trainers.

• Observations

The AAA gave the view that applicants impart training to the trainees and thus provide ATR extension services. On completion of the said training the applicant issues course completion certificate which is a pre-requisite document for preferring application before the DGCA who conducts the examination through an approved examiner and on passing of the said exam the DGC records the said ATR extension in the CPL of the pilots concerned. Thus it does not result in any qualification.

• Decision

The services of the appellant are not covered under entry no 66(a) of the Notification No 12/2017(CTR) and hence not eligible for exemption

Summarization

The AAR has emphasized in this case law that the services provided lead to examination conducted by DGCA which further lead to DGCA recording the said ATR extension in the CPL of the pilot and hence does not result in a qualification, hence the services provided by the appellant are not exempted from GST

Opinion/Conclusion

The law is very clear that the exemptions is provided to the services provided by “educational institutions” and educational institutions are clearly defined as the ones serving either pre-school education and education upto higher secondary school or equivalent or education as a part of the curriculum for obtaining a qualification recognized by any law for the time being in force or education as a part of an approved education course.

The legal counsels in various cases discussed above have been contending on the point whether the education served by the institutes directly leads to a legally recognized qualification or whether a direct relation with the legally recognized qualification is a prerequisite for exemption or not.

Upon plain reading of the provisions, the words “as a part of the curriculum for obtaining” are unambiguous and very clear in their meaning to answer the said questions being fought over in the courts or advance ruling authorities. The education must be a part of the curriculum, and not necessarily be the exhaustive and the only thing to achieve the qualification. There could be other steps involved in achieving the final qualification and that does not exclude the institute from the definition of an educational institution.

Any training/certificate/qualification offered by approved training institutes conferred some value in the eyes of law by the Aircraft Act and Rules still where it only acts as a prerequisite for obtaining license from the DGCA for enabling the trainees for becoming commercial pilots. The course completion certificate issued by the institutes cannot be withered away or ignored merely because the same does not automatically allow the holder of such qualification to certify the repair, maintenance airworthiness of an aircraft and for which authorization a further examination to be conducted by the DGCA has to be passed.

Now, whether the commercial pilot license is a qualification recognized by law, is still a debatable question. Flying an aircraft without having that license is a serious crime and hence signifies the importance of having that license. Going by general parlance, a qualification is something that is conferred upon someone by an authorized or approved institution. DGCA is a regulatory body empowered by Indian Aircraft Act and the rules made thereunder. So, the license issued by it should essentially be considered as a qualification recognized by the law. 

An important aspect to this question is that there has been no debate in the cases that even if due to any contentions the license is not covered under qualification, even then the training being so provided can be considered as education as a part of an approved vocational course.

So the debate still remains. However, if we try to understand the intent of the parliament in giving exemption in question, it would clearly be to promote education that leads to employment. And to avoid the misuse, it has put the words like “qualification recognised by the law” and “approved vocational course”. In the light of such intent also, it is clear and apparent that the exemption must be provided.