At the outset, a happy and a prosperous new year to all the readers. With the New Year comes new joys, new rays of hope, new resolutions as well as New Circulars and Notifications!!!(A New Year gift from the Government)
The Government has issued Circular No. 82/01/2019-GST on 01-01-2019, which clarifies on applicability of GST for IIM’s. In this article, we would discuss on the issues addressed by the circular. But before diving deep into the circular, let us first understand GST implications for IIM’s.
1. APPLICABILITY OF GST FOR IIM’S- PROVISIONS UNDER GST
GST applicability: -GST is applicable on all supply of goods or services unless specifically exempted by way of notification under section 11 of CGST Act, 2017. Exemption for services are brought out by Notification 12/2017 CTR dated 28 June 2017 (as amended from time to time).
|Definition of educational institution:- Notification 12/2017 CTR, under section 2(y) defines an “educational institution” as an institution providing services by way of, interalia, education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force.
Although IIM’s provide education, the same was not recognised under any law (as IIM’s were previously not set up under any act of parliament); thus, the above-said exemption was not available for IIM’s. It is for this regard that Government had inserted entry no. 67 to the said notification, which provided a separate exemption to IIM’s. The same is provided below.
Entry no. 66 (general exemption for all educational institutions):- This entry exempts service provided by an educational institution to its students, faculty and staff. Further, it also exempts services provided to educational institution by way of transportation, catering, security, housekeeping and other related services.
Entry no. 67 (specific exemption to IIM’s):- This entry exempts the following services provided by IIM’s to its students, namely
The table below depicts the GST position of IIM’s via a vis other educational institutions prior to issuance of circular 82/01/2019 GST dated 01-01-2019:-
|Particulars||Educational institutions (covered under definition above)||IIM’s|
|Exemption on outward supply||All services provided to its students, faculty and staff are exempt||Only few educational programs were exempt; whereas others were taxable|
|Benefit for inward supply (purchases)||Exemption would be available for transportation, catering, security, house-keeping and other related services||No exemptions were available for IIM’s as they did not fit in the definition of educational institution.|
2. THE IMPACT OF INTRODUCTION OF IIM ACT
Introduction of IIM Act, 2017:- IIM Act, 2017 (effective from 31-01-2018) declares IIM’s to be institutes of national importance. Under section 7(2) (f) of IIM Act, IIM’s have been conferred the power to grant degrees, diplomas and other academic distinctions or titles.
IIM’s would now be educational institution: -The 2 conditions required for an educational institution as per Notification 12/2017 CTR are,
Thus, IIM’s could now be called an educational institution for the purpose of Notification 12/2017 CTR.
Nevertheless, if they qualify as an educational institution, they would be eligible for 2 exemptions, i.e. under entry no.66 (general exemption for educational institution) as well as entry no.67 (specific exemption for IIM’s). In cases where two or more exemption notifications are available to an assessee; the assessee can claim the one that is more beneficial to him. The Supreme Court upheld the same in case of Collector of Central Excise, Baroda vs Indian Petro Chemicals(1997) 92 ELT 13 (SC). Click here to view the SC verdict
Thus, IIM’s would be legally entitled to enjoy the benefits of entry no.66, which exempts all services provided to the students.
Advance Rulings (IIM’s thrown out of frying pan into the fire):-
Rulings against the IIM’s:- Advance rulings, in case of IIM, Indore (Order No. 10/2018 dated 10-08-2018)and IIM, Bangalore (Order No. 25/2018 dated 25-10-2018) have held that the exemptions in entry no.66 would not be eligible to IIM’s and they had to strictly adhere to the specific exemptions provided in entry no.67.
Rulings in favour of IIM’s:- Advance ruling, in case of IIM, Calcutta (21/WBAAR/2018-19 dated 02.11.18) held that IIM was an educational institution; thus eligible for general exemption under entry no.66.
The contradicting views as given above led to more confusion about applicability of GST to IIM’s.
Entry no.67 removed vide Notification: – Notification 28/2018 CTR dated 31-12-2018 removed the specific exemption granted to IIM’s (vide entry no. 67). The deletion of that entry left behind many unanswered questions such as-
The old year ended carrying a huge load of doubts and queries with regard to GST on IIM’s. All these were a clear indication stating “Picture abhii baakii hai”.
3. CIRCULAR CLARIFYING GST APPLICABILITY TO PROGRAMS BY IIM’S
This circular comes as a welcome move, which tries to solve all the doubts pondering in the minds of professionals. The genesis of Circular 82/01/2019-GST dated 01-01-2019 is provided below, which answers all the unanswered questions:-
Whether IIM’s are educational institutions:- As per the provisions of IIM Act, IIM’s are empowered to grant degrees, diplomas, and other academic distinctions. Thus with effect from 31st January 2018, all the IIMs are “educational institutions” for the purpose of claiming exemptions provided in Notification 12/2017 CTR dated 28 June,2017.
Exemption provided to long duration programs:-
GST applicability on short duration programs:-
Stand to be taken for the services rendered between 31-01-2018 and 31-12-2018:-
Withdrawal of specific exemption to IIM’s vide entry no. 67:-
Let us encapsulate the entire circular with the help of the Table provided below:-
|Time period||Exemptions available to IIM||Services liable to GST|
|01-07-17to 31-01-18||The following educational programs:-
||All other services are taxable for IIM’s (as they cannot avail the benefit of an educational institution)|
|31-01-18 onwards||All long duration programs (one year or more) provided by IIM’s to their students for which they award diploma/degree certificate.||Short duration executive programs|
The recent circular seems to be an outcome of the efforts put by IIM’s by continuous representations done seeking to confirm coverage in GST exemption as it imparts education recognized by law. It goes back to the basic funda of management “never give up until the goal is reached”.
Thus, we may say that the IIM’s not only preach management, they practice it as well.
The recent developments in GST are measures towards simplifying GST law further and providing GST benefits and concessions wherever applicable.
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