No GST exemption on educational services provided by Tutor Comp Info Tech

In re Tutor Comp Info Tech Private limited (GST AAR Kerala)

GST leviable on training/coaching services, as it does not come under the definition of ‘educational institution’ to claim GST exemption

The AAR, Kerala in the matter of M/s Tutor Comp Info Tech Private Limited [Advance Ruling No. KER/ 143/2021 dated July 27, 2022] has ruled that training provided by a training service provider neither leads to grant of any qualification recognised by any law nor is part of an approved vocational education course. Held that, training services does not come under the definition of ‘educational institution’ to claim Goods and Services Tax (“GST”) exemption under Sl. No. 66 of the Notification No. 12/2017 CT (Rate) dated 28.06.2017 (“the Services Exemption Notification”).

Facts:

M/s Tutor Comp Info Tech Private Limited (“the Applicant”) is offering education services to individual students, institutions and Government through its own online platform. The students need to register on the Applicant’s website, then an academic coordinator is assigned to each student and thereafter customized study materials are prepared for each student. Further, the invoices are raised with the description “Tuition Fees”.

The Applicant further submitted that currently the main source of revenue for them is from providing services to overseas students, and hence the services of the Applicant constitute export of services. They were remitting Integrated Goods and Services Tax (“IGST”) and claiming refund of the same. The Applicant contended that the services provided by them to individual students is liable to NIL rate GST since it falls under Sl. No.66(a) of the Services Exemption Notification.

Issue:

Whether the training services provided by the Applicant falls under Sl.No.66(a) of the Services Exemption Notification?

Held:

The AAR, Kerala in Advance Ruling No. KER/ 143/2021 held as under:

• Noted that, in order to qualify for exemption under Sl. No. 66(a) of the Services Exemption Notification, the Applicant should be an ‘educational institution’ as defined under clause (y) of Para 2 of the Services Exemption notification.
• Opined that, the Applicant is not a formal school, but an institution providing special training / coaching to students who are enrolled in formal schools for education up to higher secondary or equivalent.
• Observed that, the training provided by the Applicant neither leads to grant of any qualification recognised by any law for the time being in force nor is part of an approved vocational education course.
• Stated that, the services provided by the Applicant are appropriately classifiable under Heading 9992 – Group – 99929 – SAC – 999293 as commercial training and coaching services.
• Held that, the Applicant does not fall under the scope of ‘educational institution’ as defined in sub-clause (i) of clause (y) of Para 2 of the Services Exemption Notification. Hence, not exempted under S1. No. 66 of the Services Exemption

Relevant Provisions:

Sl. No. 66 of the Services Exemption Notification:

“Sl. No.	Chapter, Section, Heading, Group or Service Code (Tariff)	Description of Services	Rate (percent)	Condition
66	Heading 9992 or Heading 9963	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 house-keeping services performed in such educational institution; (iv) services relating to admission to, or conduct of examination by, such institution;  Provided that nothing contained in sub-items (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. (v) supply of online educational journals or periodicals:	Nil	Nil”

FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KERALA

1. M/s Tutor Comp Info Tech Private limited (hereinafter referred to as the applicant) is is a company registered under the Companies Act, 1956 and a unit in the Infopark SEZ, Kakkanad.

2. At the outset, it is clarified that the provisions of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act) and the Kerala State Goods and Services Tax Act, 2017 (hereinafter referred to as KSGST Act) are the same except for certain provisions. Accordingly, a reference hereinafter to the provisions of the CGST Act, Rules and the notifications issued there under shall include a reference to the corresponding provisions of the KSGST Act. Rules and the notifications issued there under.

3. The applicant requested an advance ruling on the following:

3.1. Whether the (i) transaction between applicant and individual student on a one to one basis; and (ii) providing education up to Higher Secondary School; fails under Sl.No.66(a) of Notification No. 12/2017 CT (Rate) dated 28.06.2017

4. Contentions of the Applicant:

4.1. The applicant submits that they are offering education services to student’s through its own online platform. The applicant provides services in the following categories;

a. Educational services to individual students.

b. Educational services to institutions and the students.

c. Educational services to Government.

4.2. The applicant submitted the process of registration and the nature of services rendered by them in detail .In order to register the students has to visit website of the applicant the student submits the application, the resource person of the applicant namely; www.tutorcomp.com and enter the necessary particulars in the application. On submission of the application the student will be contacted by the resource person of the applicant. After ascertaining the particulars, requirement of the student, the academic coordinator (teacher) will be allocated to each student. Academic coordinator will assess the details filled in and speak to the student understand student specific academic, assignment or homework. Student are taken through diagnostic assessment or pre-assessment before instruction, which focuses on the area of domain knowledge before beginning the tutoring. Lesson plans are designed according to the outcome of the assessment. Thereafter customized study materials are prepared and send to each student and also shared during the class. Classes are taken as per the timing convenient to the student and coordinator. The invoices are raised with description “Tuition Fees”. The sample copy of the communication with the student, sample question paper and sample invoices raised on student is attached as Annexure I, II and III to the  application. The applicant further submits that at present the main source of revenue for them is from providing services to overseas students, and hence the services of the applicant constitute export of services. They are remitting IGST and claiming refund of the same.

4.3. The applicant contends that that on verification of various provisions, they are of the view that the services provided by them to individual students is liable to NIL rate since it falls under Sl.No.66(a) of Notification No. 12/2017 CT (Rate) dated 28.06.2017

4.4. The term educational institution has been defined in clause (y) of Para 2 of the said notification, which reads as under;

(y) ‘educational institution’ means an institution providing services by way of,:-

a. pre-school education  and education up to higher secondary school or equivalent;

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

c. education as a part of an approved vocational education course;

4.5. It is further submitted that reading the above definition of educational institution, it is clear that educational institution, is an institution providing services by way of preschool and education up to higher secondary school. The Black’s Law Dictionary defines “institution” as “is sometimes used as descriptive of an establishment or place where the business or operations of a society or association is carried on, at other times it is used to designate the organized body. Benjamin Rose Institute Vs. Myers, 92 Ohio St. 252, 110 N.E. 924, 926, 927, L.R.A. 1916D, 1170; Bartling Vs. Wit, 96 Neb. 532, 148 N.W. 507, 509.” Admittedly the applicant is an organization having a well defined organization structure consisting of advisory board, resource persons, infrastructural facilities and the applicant has 75+ educators i.e., instructors, 500+ students. Hence the applicant clearly qualifies as an institution. Next condition is that the said institution should provide “education” up to Higher Secondary School or equivalent. Education is the systematic instruction, schooling or training given to the young persons in preparation for the work of life. It also connotes the whole courses of scholastic instruction which a person has received. Education connotes the process of training and developing the knowledge, skill, mind and character of students by format schooling. Education is necessary to develop the personality of a person as a. whole and in totality as it provides the process of training and acquiring the knowledge, skills, developing mind and character by formal schooling. State of Orissa Vs. Mamata Mohanty, (2011) 3 SCC 436.

4.6. Further in P.A. Inamdar Vs. State of Maharashtra (2005) (6 SCC 537), the Hon’ble SC observed that:

8.1 “Education” according to Chambers Dictionary is “bringing up or training; ….  strengthening of the powers of body or mind; culture”.

82. In Advance Law Lexicon (P. Ramanathan Aiyar, 3rdEdn., 2005, Vol.2 “education is defined in very wide terms. It is stated:

“Education is the bringing up; the process of developing and training the powers and capabilities of human beings. In its broadest sense the word comprehends not merely the instruction received at school or college but the whole course of training moral, intellectual and physical; is not limited to the ordinary instruction of the child in the pursuits of literature. It also comprehends a proper attention to the moral and religious sentiments of the child, and it is sometimes used as synonymous with ‘learning’.

83. In Sales Trustee, Lok Shikshana Trust Vs. CIT (1976) (1 SCC 264) the term “education” was held to mean (SCC p.262, para 5).

“the systematic instruction, schooling or training given to the young in preparation for the work of life. It also  connotes the whole course of scholastic instruction which a person has received………………………. What education connotes……… is the process of :_-tudents by formal schooling”

88. Education is:

“…. Continual growth of personality, steady development of character, and the qualitative improvement of^– life. A trained mind has the capacity to draw spiritual nourishment from every experience, be it defeat or victory, sorrow or joy. Education is training the mind and not stuffing the brain.” (see Eternal Values for A changing Society, Vol.Ill – Education for Human Excellence, published by Bharatiya Vidhya Bhavan, Bombay at p.19)

‘we want that education by which character is formed, strength of mind is increased, the intellect is expanded, and by which one can stand on one’s own feet…. The end of all education all training, should be man-making. The end and aim of all training is to make the man grow. The training by which the current and expression of will are brought under control and become fruitful is called education”. (Swami Vivekanand as quoted ibid., at p.20)

4.7. The Applicant submits that the judgments quoted make it clear that “education”, means, (a) systematic instruction, schooling or training given to the young persons in preparation for the work of life; (b) bringing up; the process of developing and training the powers and capabilities of human beings; (c) is not merely the instruction received at school or college but the whole course of training moral, intellectual and physical. And it is sometimes used as synonymous with learning”. Further it is also contended that these judgments also make it clear schooling is not the only method of providing education, and any kind of systematic training constitutes “education”. Therefore any training or instruction given to the young for their preparation constitutes education. In respect of the exemption relating to education services of pre-school and up to higher secondary; the course need not have a curriculum, the qualification need not have legal recognition or approval, the words; “by way of ” indicates that the exemption is broad and the emphasis is on the stage of education. The objective is to increase the speed of basic education, reduce the cost and make it free from all taxes. The exemption of sub-clause (i) is without any condition unlike many stipulations for (ii) and (iii) in the definition of educational institution in the same exemption notification. The exemption is targeted towards school education in all forms and as per the definition in the exemption notification, any entity providing basic school up to higher secondary or equivalent is an educational institution. There is no condition that the service should be through or by a school.

4.8. It is further submitted that the applicant is imparting training to the young children. The training imparted is as per the course curriculum followed by the said student in their school. Hence the activity of the applicant clearly falls within the meaning of the term “education” and also that applicant is an “institution”. Since applicant provides education, it is an “educational institution”.

5. Remarks of the Jurisdictional Officer:

5.1. The application was forwarded to the jurisdictional officer as per provisions of Section 98(1) of the CGST Act. The jurisdictional officer has not submitted any remarks and hence it is presumed that the jurisdictional officer has no specific comments to offer. It is also construed that there are no proceedings pending on the issue against the applicant.

6. Personal Hearing:

6.1. The applicant was granted an opportunity for personal hearing on 05.07.2022. The authorized representative of the applicant, Shri R.Krishna Iyer & CO, CA, represented the applicant in the personal hearing. The representative reiterated the contentions made in the application and requested to issue rulings on the basis of the submissions in the application.

7. Discussion and Finding:

7.1. The matter was examined in detail. In order to answer the questions raised, it is necessary to analyse the activity of the applicant with reference to provisions contained in S1 No. 66 of Notification No. 12/2017 CT (Rate) dated 28.06.2017 and the Scheme of Classification of Services under GST. SL No. 66 of the Notification No. 12/2017 CT (Rate) dated 28.06.2017 reads as follows;

–

7.2. The educational services are classified under Heading 9992 in Notifica­tion No. 11/2017-Central Tax (Rate) dated 28.06.2017. As per the Scheme of Classification of Services under GST notified as Annexure to Notifica­tion No. 11/2017-Central Tax (Rate) dated 28.06.2017. the education service under Heading 9992 are further sub-divided into six groups comprising of pre – pri­mary, primary, secondary, higher, specialised and other educational and sup­port services as below:

Heading  and Group	Service Code (Tariff)	Service Description
9992		Educational Services
Group 99921		Pre-primary education services
	999210	Pre-primary education services
Group 99922		Primary education services
	999220	Primary education services
Group 99923		Secondary Education Services
	999231	Secondary education services, general
	999232	Secondary education services, technical and vocational
Group 99924		Higher education services
	999241	Higher education services, general
	999242	Higher education services, technical
	999243	Higher education services, vocational
	999249	Other higher education services
Group 99925		Specialised education services
	999259	Specialised education services
Group 99929		Other education and training services and educational support services
	999291	Cultural education services
	999292	Sports  and  recreation  education    services
	999293	Commercial training and coaching ser­vices
	999294	Other education and training services n.e.c.
	999295	Services involving conduct of examina­tion for admission to educational insti­tutions
	999299	Other educational support services

7.3. The term “educational institution” is defined under clause (y) of Para 2 of Notification No. 12/2017 CT (Rate) dated 28.06.2017 as follows;

“educational institution.” means an institution providing services by way of

i. pre education and education up to higher secondary school or equivalent;

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

iii. education as a part of an approved vocational education course.

7.4. The applicant claims that they are eligible for exemption under Si. No. 66(a) to the Notification No. 12/2017 CT (Rate) dated 28.06.2017. In order to qualify for exemption under this entry the applicant should be an educational institution as defined under clause (y) of Para 2 of the said notification.

7.5. The first kind of educational institution defined in clause (y) of Para 2 of Notification No. 12/2017 CT (Rate) dated 28.06.2017 is an institution providing services by way of pre-school education and education up to higher sec­ondary school or equivalent. “Education” is not defined in the CGST Act but as per Apex Court decision in “Loka Shikshana Trust v/s CIT”, education is process of training and developing knowledge, skill and character of students by normal schooling.

7.6. The entry exempts educational institutions from pre-school to higher secondary school or an educational institution which is equivalent to a ‘school’. Admittedly, the applicant is not a formal school, but an institution providing special training / coaching to students who are enrolled in formal schools for education up to higher secondary or equivalent. Even though the activity; training and coaching undertaken by the applicant can be claimed to be education services in layman’s understanding, those activities do not qualify to be classified under any of the Groups; 99921 – Pre-primary education services; 99922 – Primary education services or 99923 – Secondary education services as core educational services provided by schools up to higher secondary or equivalent. On the contrary the services provided by the applicant are appropriately classifiable under Heading 9992 – Group – 99929 – SAC ­999293 as commercial training and coaching services. Therefore, the applicant do not fall under the scope of educational institution as defined in sub-clause (i) of clause (v) of Para 2 of Notification No. 12/2017 CT (Rate) dated 28.06.2017.

7.7. Further, 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 and those engaged  providing education as a part of an approved vocational education course are covered by the definition of “educational institution” in sub-clauses (ii) and (iii) respectively of clause (y) of Para 2 of the said notification. The training provided by the applicant neither leads to grant of any qualification recognised by any law for the time being in force nor is part of an approved vocational education course. Therefore the applicant is not covered under the scope of definition of “educational institution” in Para 2(y) of Notification No. 12/2017 CT (Rate) dated 28.06.2017.

7.8. Accordingly, the applicant is not eligible for the exemption as per the entry at SI. No. 66 of the saic notification. Given the observations stated above, the following rulings are issued:

RULING

Question: ‘Whether the (i) transaction between applicant and individual student on a one to one basis; and (ii) providing education up to Higher Secondary School falls under Sl.No.66(a) of Notification No. 12/2017 CT (Rate) dated 28.06.2017

Ruling: The applicant is not an educational institution as defined in clause (y) of Para 2 of Notification No. 12/2017 CT (Rate) dated 28.06.2017. Therefore, the services provided by the applicant are not exempt under Sl. No. 66 of the said notification.

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(Author can be reached at info@a2ztaxcorp.com)