Education is one of the key factors for generation of human capital in the Country. Education plays an important role for the Nation building process. The right to Education is one of the Fundamental Rights of the Constitution of India. The Government has a constitutional obligation to provide free and compulsory elementary education to every child in India. Thus, the prime responsibility of the Government to promote education in the country and it should be exempted from taxes. GST Law recognizes this principle and framed the provisions accordingly to ensure that the core educational services are fully exempt from tax.
The author has made an attempt by this article to analysis the provision of tax on Education Services in the erstwhile Service Tax Law as well as under GST Law.
Tax on Education Services in Pre – GST era:
In terms of Section 66B of the Finance Act, 1994, service tax will be leviable on all services provided in the taxable territory by a person to another for a consideration other than services specified in the negative list. The following services relating to education are specified in the negative list and exempted from tax:-
(a) pre- school education and education up to higher secondary school or equivalent;
(b) education as a part of a prescribed curriculum for obtaining a qualification recognized by law for the time being in force;
(c) education as a part of an approved vocational education course.
It is clarified that education as a part of curriculum for obtaining a qualification recognized by law means 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.
Further, clarified that 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 is not covered under negative list. To be covered in the negative list a course should be recognized by an Indian law.
Apart from the services covered under the negative list there are certain services provided to or by education institutions are separately exempted under the mega-notification. These are services provided to or by an educational institution in respect of education exempted from service tax, by way of; (a) auxiliary educational services; or (b) renting of immovable property. The private coaching centers relating education are not covered under the negative list but such private tutors can avail the benefit of threshold exemption.
Tax on Education Services under GST regime:-
“Education “is not defined in the CGST Act but as per Apex Court decision in the case of “Loka Shikshana Trust vs. CIT “ , education is process of training and developing knowledge , skill and character of students by normal schooling. GST on services being a legacy carried from the Service Tax provisions was prevailed in the pre-GST era. The GST Act has exempted the core educational services and taxed other services at the standard rate of 18%.
Classification of Education Services under GST:-
Educations Services are classified into six groups vide Notification No. 11/2017- Central Tax (Rate), dated 28.06.2017. The details of classification of education services as under:
(1) Pre- primary education services’
(2) Primary education Services;
(3) Secondary education Services.
(4) Higher education Services.
(5) Specialized education Services.
(6) Other education & training services and educational support services.
Tax Rate of GST on Education Services: – The rates of GST on education services (as per Notification No. 11/2017-Central Tax (Rate) and Notification No. 12/2017-Central Tax (Rate) all dated 28-06-2017 as amended) are as below Table:
|Chapter/Section/Heading||Description of Services||Rate / Notification|
|9992||Education Services||18% ( 9% Central Tax + 9% State Tax ) / Serial 30 of Notification No. 11/2017- Central Tax (Rate) dated 28th June, 2017|
|9992||Services Provided –
(a) by an education institution to its students, faculty and staff;
(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; up to higher secondary :
Provided that nothing contained in entry (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.
|NIL / Serial No. 66 of Notification No. 12/2017-Central Tax (Rate) dated 28th June, 2017|
|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 year integrated programme in Management.||NIL / Serial No. 67 of Notification No. 12/2017-Central Tax(Rate) dated 28th June, 2017|
|90 or any chapter||Technical aids for education, rehabilitation, vocational training and employment of the blind such as Braille typewriters, braille watches, teaching and learning aids, games and other instruments and vocational aids specifically adapted for use of the blind Braille instruments, paper etc.||5% / Serial No. 257 of Schedule-I of the Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017|
|9023||Instruments, apparatus and models, designed for demonstrational purposes (for example, in education or exhibitions), unsuitable for other uses.||28% / Serial No. 191 of Schedule-IV of the Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017|
Thus, services by an educational institution to students, faculty and staff are exempt. 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 recognized by any law for the time being in force ;
(iii) Education as a part of an approved vocational education course.
From the above, it is clear that education institution up to higher secondary school or equivalent is free from tax under GST, which is similar to earlier provision of Service Tax.
Within the term “educational institution”, sub-clause (ii) covers institution 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, which has been explained in the forgoing paras under erstwhile Service tax provision.
Within the term “ educational institution “, sub-clause (iii) covers institution providing services by way of education as a part of “ approved vocational education course” , which means ,-
A course run by an industrial training institute or an industrial training center affiliated to the National Council for Vocational Training or State Council Vocational Training offering course in designated trades notified under the Apprentices Act, 1961 (52 of 1961); or
(ii) A Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Director General Training, Ministry of Skill Development and Entrepreneurship.
Therefore, only those intuitions whose operations conform to the specifies given in the definition of the term “Educational Institution”, would be treated as one and entitled to avail exemptions provided by the law. Thus implies that private coaching centers or other unrecognized institutions would not be treated as “educational institutions under GST and cannot avail exemptions from payment of tax under GST.
Key features of exemption on Educational Services:
1. The educational institutions up to Higher Secondary School level do not suffer tax on output services and also on most of the important input services under GST regime.
2. There are certain input services like canteen, repairs and maintenance etc. provided by private persons to educational institutions were subject to service tax in Pre-GST era and the same tax treatment has been continued in GST regime.
3. The 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.
4. The Annual subscription / fees charged as lodging /boarding charges by such educational institutions from its students for hostel accommodation shall not attract GST.
5. The Output services related to the specified courses provided by IIM’s would be exempt from Tax.
6. The program such as Executive Development Programs run by the IIM’s would be subject to GST.
7. The following four categories of Auxiliary educational services have been exempted from Tax under GST:
(i) any services relating to imparting any skill, knowledge or education, or
(ii) development of course content, or
(iii) any other knowledge – enhancement activity, whether for the students or the faculty , or
(iv) any other services which educational institutions ordinarily carry out themselves but may obtain as outsourced services from any other person, including following services relating to:
(a) admission to such institution
(b) conduct of examination
(c) catering for the students under any mid-day meals scheme sponsored by Government
(d) transportation of students, faculty or staff of such institution.
8. The Auxiliary educational services other than what is specified above would not be entitled to any exemption.
9. The services of conducting admission tests for admission to colleges in case of educational institutions are providing qualification recognized by law for the time being in force shall not be liable to GST.
Who will pay GST on Education Services?
Education Services are under forward charge. Therefore, GST shall be paid by the supplier of services.
Treatment of supply of Educational Services:-
The concept of supply plays an important role under GST regime for determination of tax, so it is better to focus on the place of supply in various situations of Educational Services as under:
(a) What will be the place of supply of Educational Services where the location of supplier of services and the location of the recipient of services is in India?
As per Section 12(6) of the IGST Act, 2017 the place of supply of services provided by way of admission to an educational or other place and services ancillary thereto, shall be the place where the event is actually held or such other place is located.
As per section 12(7) of the IGST Act, 2017 the place of supply of services provided by way of ,- (a) organization of a cultural, artistic, sporting, scientific, educational or entertainment event including supply of services in relation to a conference, fair, exhibition, celebration or similar events; or (b) services ancillary to organization of any of the events or services referred to in clause (a), or assigning of sponsorship to such events:-
(i) To a registered person, shall be the location of such person;
(ii) To a person other than a registered person, shall be the place where the event is actually held and if the event is held outside India, the place of supply shall be the location of the recipient.
(b) What will be the Place of supply of Educational Services where the location of the supplier of services or the location of the recipient of services is outside India?
As per Section 13(5) of the IGST Act, 2017, the place of supply of services supplied by way of admission to, or organization of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organization, shall be the place where the event is actually held.
Educational Institution runs by charitable organization:
Charitable Trust running schools, colleges or any Educational services or performing activities related to advance of educational programmes specifically for abandoned , orphans, homeless children, physically or mentally abused persons, prisoners or person above 65 years in a rural area and these services shall be wholly exempted from GST.
Composite and Mixed supply of Educational Services:
The supply of education services when provided by Boarding schools for service of education coupled with other services like providing dwelling units for residence and food, this is the case of composite or bundled services where the charges for education, lodging and boarding is inseparable. Their tax ability will be determined in terms of the principles laid down in Section 2(30) read with Section 8 of the CGST Act, 2017. In this case since the predominant nature is determined by the service of education, the other services for the purpose of determining tax liability the entire consideration for the supply will be exempt.
If an artificial bundle of service is created by clubbing two courses together, only one of which leads to a qualification recognised by law, then by application of the rule of determination of tax ability of a supply which is not bundled in the ordinary course of business, it shall be treated as a mixed supply as per provisions contained in Section 2(74) read with Section 8 of the CGST Act, 2017. The tax ability will be determined by the supply which attracts highest rate of GST.
Conclusion: To sum up, the taxability of Educational Services has been exempted upto Higher Secondary School level including certain ancillary input services. The output services of lodging / boarding in hostels provided by such educational institutions which are providing pre- school education and education upto higher secondary school or equivalent or education leading to a qualification recognized by law, are fully exempt from GST. Similarly, output services related to the specified courses provided by IIM’s are exempted. Executive programme run by the IIM’s are specifically excluded, hence such courses would be subject to GST. However, it is observed that commercialization of education in realty is defeating the very objective of the Government policy.
Ramesh Chandra Jena, B. A (Hons)., M.A (Eco)., D.M.M., LL.B.
Senior Manager- Indirect Taxation, KSK Energy Ventures Limited.