Dr. Sanjiv Agarwal, FCA, FCS
It is a growing trend now a days that more and more Indian students are opting for higher and technical education from foreign universities abroad and there are agencies who act as facilitators (intermediaries) between potential students and foreign universities. These promote courses of foreign universities in India, arrange or convince to students to join such courses and provide certain ancillary services to both, students as well as foreign universities. These services are in the nature of advisory and/or support services for which it receives consideration in convertible foreign exchange. According to general practice, there is service of promotion of the university courses among the prospective students and the service provider (agent of University) receives consideration for it as an independent service provider.
Since there was confusion prevalent on the issue of taxability of such services and whether such services can be considered as export of service or not, M/s Global Reach Education Services Pvt. Ltd. sought an Advance Ruling from Authority for Advance Ruling, West Bengal.
The assessee, known as education agent of the foreign university was a independent contractor and the relationship between such agent and University was neither one of the employer and employee nor one of principal and agent.
The agreement revealed that the main service provided by the applicant is facilitating recruitment of students and the consideration is paid as commission on the basis of course fee and recruitment through the applicant. Promotion of the courses is incidental to the above principal supply. While providing the above service the applicant is subject to audit by the University which includes fulfilling recruitment targets. If the students get enrolled directly by the University through distant education or online services, the Applicant will not be paid any consideration whether or not it has provided any promotional service. Apart from the above consideration received from the University, the Applicant is not allowed to receive any fees or charges from the students or deduct anything from the charges or fees payable by the students to the University.
The AAR observed that the assessee is facilitating recruitment / enrolment of students to foreign Universities. Promotional service is incidental and ancillary to the above principal supply and the assessee is paid consideration in the form of Commission, based on performance in recruiting students, as a percentage of the tuition fee collected from the students enrolled through the assessee. The assessee, therefore, represents the University in the territory of India and acts as its recruitment agent. The University engages the Education Agent to be its representative to perform the Services from the commencement date in the Territory and on the terms set out in this Agreement until the Expiry date.
It was, therefore, ruled that recruitment services provided to students of foreign University are not covered under export of services and are taxable services under GST. Such services are provided only as a representative of foreign university and not as an independent service provider. Therefore, place of supply shall be governed by section 13(8) (b) and not by section 13(2) of IGST Act. Place of supply of services shall be the location of service provider in India and it will not qualify as ‘export’ of service. [In Re: Global Reach Education Services Pvt. Ltd. (2018) 12 GSTL 387; (2018) 67 GST 265; (2018) 4 TMI 808; (2018) 92 taxmann.com 211 (AAR, West Bengal)].
Appellate Advance Ruling
The assessee was not convinced with the ruling and approached Appellate Authority (AAAR) against the ruling of AAR, West Bengal decided by AAAR on 24.07.2018. AAAR observed that the main responsibilities of education agent inter alia, included:
(a) promote the Courses of the University;
(b) find suitable Prospective Students to undertake Courses;
(c) in accordance with University procedures and requirements, recruit and assist in the recruitment of suitable students.
The definition of ‘intermediary’ under Clause (13) of Section 2 of the Integrated Goods and Services Tax Act, 2017, reads as under:
‘Intermediary’ means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.
In this case, the assessee promotes the courses of the University, finds suitable prospective students to undertake the courses, and, in accordance with University procedures and requirements, recruits and assists in the recruitment of suitable students, and hence, the Appellant is to be considered as an intermediary in terms of Section 2(13) of the IGST Act.
The AAAR also distinguished the following cases relied upon by the assessee on facts as well as difference in law relating to erstwhile service tax:
The AAAR made the following assertions:
(1) When assessee promotes the courses of foreign Universities, finds suitable prospective students to undertake the courses in accordance with University procedures and requirements, recruits and assists in recruitment of suitable students.
(2) Assessee to be considered as an intermediary in terms of section 2(13) of IGST Act, 2017, more so when he is not paid any consideration for services provided, if no student is admitted in the University.
(3) Services provided by University can not be treated as export of services as per section 2(6) of IGST Act, 2017 and are thus subject to levy of GST.
(4) Definition of ‘intermediary’ under Service Tax and IGST Act are difficult and can not be considered as pari materiato earlier definition in place of provision of services Rules, 2012.
(5) Intermediary services may also include ancillary services.
The AAAR, thus confirmed the advance ruling pronounced by AAR, West Bengal that the services in question were not ‘export of services’ and were exigible to levy of GST under the GST laws.