GST on Education Services

 CA Kamal Kumar

Introduction

The word “Education” has not been defined under the CGST Act, 2017. However, the Apex Court decision in the case of “Loka Shikshana Trust vs CIT” has decided that education is process of training and developing knowledge, skill and character of students by normal schooling.

Taxing the Education Sector has always been a sensitive issue, as education is seen more as a social activity than a business one. The Right of Children to Free and Compulsory Education Act, 2009 has made education not only compulsory but has also made the Govt. responsible to provide education at economical rates.

Thus, to promote education, it educational services has been exempted from tax. However, commercialization of education is also a reality. The distinction between core and ancillary education is hiding and education is now an organized industry with huge revenues. The GST Act tries to keep a reasonable balance whereby core educational services provided and received by educational institutions are exempted and other services are sought to be taxed at the standard rate of 18%.

Levy of GST

As per Section 9 of the Central Goods and Services Tax Act, 2017 (‘the CGST Act, 2017’)/ Section 5 of the Integrated Goods and Services Tax Act, 2017 (‘the IGST Act, 2017’), tax shall be levied on all the forms of supply of goods or services or both, unless the same is specifically exempted.

The term “supply” has been defined under Section 7(1) of the CGST Act, 2017 as under:

“For the purposes of this Act, the expression “supply” includes-

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, 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.”

Further, the term “goods” and “service” are specifically defined under the GST Law as under:

• As per Section 2(52) of the CGST Act, 2017, “goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply;”
• As per Section 2(102) of the CGST Act, 2017, “services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;”

In light of the above, it is pertinent to note that supply is defined in a very exhaustive manner and includes all form of supply of goods or services or both unless the same is specifically exempted.

Exemption under GST

Under the GST regime, core educational services has been exempted vide Notification No. 12/2017-CT(R) dated 28 June 2017/ Notification No. 09/2017-IT(R) as amended from time to time (hereinafter referred to as ‘the exemption Notification’). The exemption entries is reproduced as under:

Entry No.	Chapter/Heading/Section	Description of Services
66	9992	Services provided – (a) by an educational institution to its students, faculty and staff; (aa) by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee; (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; (v) supply of online educational journals or periodicals; Provided that nothing contained in entry (i), (ii) and (iii) of item (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. Provided further that nothing contained in sub-item (v) of item (b) shall apply to an institution providing services by way of:- (i) Pre-school education and education up to higher secondary school or equivalent; or (ii) Education as a part of an approved vocational education course.
67	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 years integrated programme in Management.

On perusal of the aforementioned Entry No. 66, it is observed that only certain specified services provided by/to an educational institution are exempt. Thus, services specified under entry no. 66 are exempted only when the same are provided by/to an institution which qualifies the definition of an ‘educational Institution’.

Educational Institution has been defined in clause 2(y) of the Notification No. 12/2017- CT(R) dated 28 June 2017 as under:

“Educational institution means an institution providing services by way of:

(i) Pre-school education and education up to 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 an approved vocational education course.”

The sub-clause (i) within the meaning of Educational institutions provides that Schools including play schools imparting education by way of pre-school education and education up to higher secondary school or equivalent shall be treated as Educational institutions. Thus, schools including play schools do not suffer GST on output services and also on most of the important input services (such as transportation of students/staff, security services, examination services, catering services). 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.

The sub-clause (ii) within the meaning of Educational institutions covers institutions providing services by way of education as a part of curriculum for obtaining a qualification recognized by any law for the time being in force. Doubts have continued as to what would be the meaning of “education as part of curriculum for obtaining qualification recognized by law” under GST. GST on services being a legacy carried forward from the Service Tax regime, the explanation given in the Education guide of 2012 can be gainfully referred to understand the meaning of the term which reads as under:

♦ What is the meaning of ‘education as a part of curriculum for obtaining a qualification recognized by law’?

It means that only such educational services are in the negative list as are related to delivery of education as ‘a part’ of the curriculum that has been prescribed for obtaining a qualification prescribed by law. It is important to understand that to be in the negative list the service should be delivered as part of curriculum. Conduct of degree courses by colleges, universities or institutions which lead grant of qualifications recognized by law would be covered. Training given by private coaching institutes would not be covered as such training does not lead to grant of a recognized qualification.

♦ Are 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 covered in the negative list entry?

No. To be covered in the negative list a course should be recognized by an Indian law.

Thus, institutions (e.g. Colleges, Universities) providing services by way of education as a part of curriculum for obtaining a qualification recognized by India Law shall be treated as Educational Institution. Thus, colleges, universities and other institution providing education as a part of curriculum for obtaining a qualification recognized by India Law do not suffer GST on output services. Also, subscription to online educational journals/periodicals by these educational institution has been exempted by way of amendment in Entry No. 66 of the exemption notification. However, training imparted by private coaching institutes  would not be covered under the exemption notification since such training does not lead to grant of a recognized qualification.

The sub-clause (ii) within the meaning of Educational institutions covers institutions providing services by way of education as a part of approved vocational course. The term “approved vocational education course” has been defined under clause 2(h) of the Notification No. 12/2017- CT(R) dated 28 June 2017 as under:

“approved vocational education course” means, –

(i) a course run by an industrial training institute or an industrial training center 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

(iii) 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”

It is to be noted that only those institutions whose operations conform to the specifics given above would be treated as one and entitled to avail exemptions provided by the law. Accordingly, output 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 recognized 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.

Further, services provided by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee has also been exempted by way amendment in Entry No. 66 of the exemption notification.

Similarly, output services related to the specified courses provided by IIM’s would be exempt. Executive Development Programs run by the IIM’s are specifically excluded, hence such courses would be subject to GST.

Conclusion

GST Law provides exemption to educational institutions providing education up to higher secondary school or equivalent from the levy of GST. Certain services received by such educational institutions for the purpose of education up to Higher Secondary level has also been exempted 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. In a nutshell, every attempt is made to ensure that the core educational services are fully exempt from the levy of GST.

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