GST On Pre-School And Higher Secondary Educational Institutions

Summary: Under the CGST Act, 2017, educational institutions providing pre-school to higher secondary education, or courses for a recognized qualification, are exempt from GST. This exemption also extends to essential ancillary services provided to these institutions by third parties, such as transportation, catering, security, and cleaning. The principle is to not burden core education with tax. However, the taxability of other services depends on whether they are “naturally bundled” with the exempt educational service. For instance, hostel and boarding services provided by the institution to its students are generally exempt as a part of a composite supply. Similarly, compulsory educational trips and examination-related services are exempt. In contrast, services like printing of books supplied separately, the sale of uniforms billed separately, or recreational trips are generally considered taxable. Institutions must also be aware of their liability to pay GST under the Reverse Charge Mechanism (RCM) for certain procured services and cannot claim Input Tax Credit (ITC) for goods and services used exclusively for providing exempt education. Registration is mandatory if the institution provides any taxable service or if RCM is applicable.

STATUTORY BACKGROUND AND CORE EXEMPTION

Section 2(y) of the CGST Act definition of “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 part of a curriculum for obtaining a qualification recognised by law;

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

Under Notification No. 12/2017-CT(R) dated 28.06.2017 (Sr. No. 66), services provided by an educational institution to its students, faculty, and staff in relation to pre-school education and education up to higher secondary school or equivalent are exempt from GST. Similarly, services provided to such educational institutions are also exempt when related to transportation, catering (including mid-day meal schemes), security, cleaning, and housekeeping services.

The exemption flows from the principle that the State intends not to burden core school education with GST. CBIC’s Education Guide (pre-GST) and subsequent clarifications under GST maintain this continuity.

2. ANCILLARY SERVICES PROVIDED BY EDUCATIONAL INSTITUTIONS

2.1 Hostel Accommodation and Boarding

• When provided by the educational institution itself to its own students, and naturally bundled with education, hostel and boarding fees are covered under the principal supply of education and remain exempt (section 2(30) CGST Act – composite supply).
• Judicial guidance:
  • Logic Management Training Institute, AAAR-Kerala (2021) 88 GST 392 – where the principal supply (coaching) was taxable, hostel was also taxable.
  • V S Institute & Hostel, AAR-UP (2023) 80 GSTL 185 – hostel run separately from school, taxable under Heading 9963.
  • Srisai Luxurious Stay LLP, AAR-Karnataka (2023) 79 GSTL 198 – accommodation to students taxable if not provided by the institution itself.

2.2 Transportation of Students, Faculty, and Staff

• Services by way of giving on hire a motor vehicle for transporting students, faculty, and staff to a person providing such transportation to an eligible educational institution are exempt [Sr. No. 22 of Notification No. 12/2017-CT(R)].
• Applicable both with operator (Heading 9966) and without operator (Heading 9973).
• Judicial guidance:
  • Maa Associates, AAR-MP (2022) 94 GST 183 – exemption applies to renting of vehicle to State Transport Undertaking or GTA for student transport.
  • Principal Commissioner of Central Tax, AAAR-AP (2022) 92 GST 535 – state-run public transport service qualifies as State Transport Undertaking.
  • MH Ecolife E-Mobility, AAR-Maharashtra (2023) 93 GST 158 – hiring of buses to city transport undertaking exempt.

2.3 Examination and Related Services

• Services to educational boards in relation to conducting examinations (including setting of question papers, printing, evaluation, invigilation, supply of answer sheets, scanning, and result processing) are exempt under Sr. No. 66(b)(iv) of Notification No. 12/2017-CT(R).
• Judicial guidance:
  • State Examination Board, AAAR-Gujarat (2022) 92 GST 659 – printing and supply of OMR sheets, question papers for state board exempt.
  • Swapna Printing Works, AAR-WB (2024) 159 taxmann.com 406 – confidential question paper printing exempt when for educational board.
  • Gopson Printers, AAR-UP (2024) 159 taxmann.com 782 – answer sheet printing for educational institution exempt.

2.4 Supply of Books and Printed Material

• Printing of content supplied by the publisher/educational institution (Heading 9989) is taxable at 18% unless specifically covered by exemption.
• Supply of textbooks by the institution itself, when part of curriculum and integral to education, can be treated as part of composite supply and exempt.
• Judicial guidance:
  • Kerala Books and Publications Society, AAR-Kerala (2021) 88 GST 150 – printing of diaries/stationery taxable @ 18%.
  • CBIC Circular No. 177/09/2022-TRU – clarifies exemption when textbooks are supplied by educational institution as part of composite supply of education.

2.5 Uniforms and Related Supplies

• The supply of school uniforms, shoes, belts, ties, and other prescribed apparel to students is a recurring question under GST. While core education services remain exempt under Sr. No. 66(a) of Notification No. 12/2017-CT(R), this exemption does not automatically extend to the supply of goods such as uniforms unless they form an inseparable part of a composite supply where the principal supply is exempt education.
• Practical implications:
• Separate billing: If uniforms are billed separately, GST applies at the relevant rate for clothing (Chapter 61/62 of GST Tariff). Mere prescription of a uniform does not make its sale integral to education unless billing and supply are inseparable from tuition
• Bundled supply: If the cost is embedded in tuition/admission fees and inseparable from education, the transaction may qualify as an exempt composite supply (requires proper structuring and documentation).
• Third-party supply: Where a designated vendor sells uniforms directly to students, GST applies to the vendor; the school’s involvement is limited to facilitation. Further under Rule 33 (Pure Agent) school collects uniform charges purely as reimbursement for a third-party vendor without markup in such case no GST liability if pure agent conditions are met.
• Judicial guidance:
• Choice Foundation, In re ([2023] 153 taxmann.com 131, AAR-Kerala) – The Authority held that supply of uniforms, even if mandated by the school, constituted a separate taxable supply of goods when charged separately from tuition fees. The exemption for educational services did not apply because uniforms were not inherently part of the educational service.
• Empire Foundation v. State of Gujarat ([2024] 168 taxmann.com 569, Gujarat HC) – The High Court clarified that uniforms supplied through third-party vendors or sold separately to students attracted GST at the applicable rate for garments, and exemption could not be claimed solely on the ground that the sale was to students of the institution.
• Sound Engineering Academy, In re ([2022] 143 taxmann.com 108, AAAR-Kerala) – The appellate authority observed that where goods like uniforms or study materials are supplied as part of a single fee without separate pricing, and the supply is naturally bundled with education, it may qualify as a composite supply with education as the principal supply, thus inheriting the exemption.

2.6 Excursions, Educational Trips & Tours

• Educational institutions often arrange excursions or educational tours for students. The GST treatment of such activities depends primarily on whether the trip is an integral part of the recognised curriculum or merely an optional/recreational activity.
• Where the excursion is compulsory and directly related to the curriculum—for example, a visit to a science museum, historical monument, or industrial plant as part of the prescribed syllabus it is naturally bundled with the principal supply of education. Under Section 2(30) of the CGST Act, this constitutes a composite supply, with education as the principal supply, and therefore enjoys exemption under Sr. No. 66(a) of Notification No. 12/2017-CT(R).
• However, where the excursion is optional, open to outsiders, or recreational in nature (such as a leisure trip to a theme park or beach resort), the activity does not form part of the curriculum and is not naturally bundled with the core educational service. In such cases, the service will be taxable at the applicable rate for passenger transport or tour operator services, generally 5% without ITC or 18% with ITC, depending on the chosen scheme under Notification No. 11/2017-CT(R).
• Further, if the school engages a third-party tour operator and recovers actual cost from students, GST could apply on reverse charge (if applicable) or on the operator’s invoice, depending on contractual structure.

Judicial Precedent:

• Choice Foundation, AAR-Kerala (2023) – Held that the taxability of excursion services depends on whether they are an essential curricular component; purely recreational trips are taxable.

2.7 Donations

• Educational institutions frequently receive donations from alumni, parents, or philanthropic organisations. Under GST law, the taxability of such donations hinges on whether there is a quid pro quo—a direct link between the payment and a supply of goods or services.
• Voluntary donations made without any conditions, where the donor does not receive a specific benefit in return, do not qualify as consideration under Section 2(31) of the CGST Act. Such amounts are outside the scope of GST and do not affect the exemption status of the institution.
• Conversely, if a donation is linked to the provision of a benefit or service—such as guaranteed admission for a child, naming rights for a building, or any other facility—it is deemed to be consideration for that supply. If the linked activity is taxable, GST will apply at the relevant rate. If it is linked to an exempt educational service, the exemption will be available.
• Further any branding or logo display of the donor is considered advertisement and thus taxable.

Judicial Precedents & Circular References:

• Commissioner v. Ahmedabad Urban Development Authority [2022-TIOL-121-SC-GST] – Supreme Court held that voluntary contributions without any direct benefit to the donor are not taxable.
• CBIC Circular No. 116/35/2019-GST – Clarifies that voluntary donations without any benefit accruing to the donor do not constitute consideration under GST.

3. Reverse Charge Mechanism (RCM) Impact

Even though core education is exempt, educational institutions may be liable to pay GST under RCM on certain procurements:

• Sponsorship services (Section 9(3), Notification No. 13/2017-CT(R)).
• Legal services from an advocate or firm of advocates.
• Services from a director (other than employee capacity).
• Import of services (e.g., subscription to foreign online journals – exempt if for educational purposes per Sr. No. 10 & 64 of Notification No. 12/2017-CT(R)).
• Security services (when procured from unregistered supplier – unless covered by exemption for education-related security).

4. Input Tax Credit (ITC) and Its Impact

• ITC is not available for goods and services used exclusively for providing exempt education services [section 17(2) CGST Act].
• For common inputs (e.g., office rent, admin expenses) used for both exempt education and taxable activities (canteen run for outsiders, renting of premises to third parties), proportionate reversal under Rule 42/43 is required.
• ITC on motor vehicles for student transport not available unless institution itself is in business of passenger transport (section 17(5)(a)).
• Failure to segregate taxable and exempt activities may lead to revenue demands for ITC reversal plus interest.

5. Registration Requirements

• Section 22(1) CGST Act – registration required if aggregate turnover exceeds ₹20 lakh (₹10 lakh for special category states).
• Even if core education is exempt, if the institution provides any taxable supply (e.g., renting hall for commercial use, sale of uniforms to outsiders, taxable printing jobs), such turnover counts toward threshold.
• No registration needed if only exempt supplies are made, regardless of turnover.
• If RCM liability exists (Section 24), registration becomes mandatory even if making only exempt supplies.

6. Composite and Mixed Supply

6.1 Composite Supply – Education as Principal Supply

When the principal supply is exempt education, naturally bundled ancillary services (hostel, transport, library, examination) also inherit the exemption (section 2(30) CGST Act).
Judicial support:

• Logic Management Training Institute, AAAR-Kerala (2021) 88 GST 392 – principal supply dictates tax treatment.
• State Examination Board, AAAR-Guj. (2022) – exam-related services form part of exempt composite supply.

6.2 Mixed Supply – Risk Areas

If supplies are made together for a single price but are not naturally bundled, GST applies at the highest rate [section 2(74), section 8(b) CGST Act]. Examples:

• Summer camp fee (open to outsiders) + regular tuition.
• Uniforms + tuition fees billed together.
• Commercial renting of premises + education.

6.3 Tests for Composite Supply

Principal Supply – one supply clearly predominates.

Natural Bundling – customarily supplied together in school operations.

Recipient Link – service provided to student/faculty/staff or educational board.

Commercial Separability – if supplied separately even without principal service, risk of mixed supply.

Single Price Risk – unrelated supplies billed together taxed at highest rate.

Regulatory Nexus – mandated by curriculum/regulations, supporting composite nature.

7. Conclusion

The GST regime recognises the special status of core school education by exempting it along with naturally bundled services integral to it. However:

• Institutions must carefully segregate taxable and exempt activities.
• Ensure composite supply principles are documented to defend exemptions.
• RCM obligations and ITC reversals must be proactively managed.
• Registration becomes compulsory if taxable activities or RCM triggers exist.
• Avoid bundling unrelated taxable services with education to prevent mixed supply exposure.

When structured correctly, and with compliance to CBIC circulars and judicial precedents, educational institutions can retain full exemption on core education while minimising GST leakage on ancillary operations.

Ready Reference Table of GST Provisions for Educational Institutions

Key Circular and Notification References

*****

Disclaimer:

This note is intended solely for general informational purposes and does not constitute legal or tax advice. The analysis is based on the provisions of the GST law, notifications, circulars, and judicial pronouncements as in force on the date of preparation. While every effort has been made to ensure accuracy, interpretations may vary and subsequent amendments or rulings may alter the position stated herein. Readers are advised to seek professional advice before acting on any information contained in this document. The author and publisher disclaim any liability for actions taken or not taken based on this material.