VAT not leviable on Sale of Prospectus by University to students

CA Bimal Jain

Publication of prospectus and making it available to students is ancillary activity to the main and predominant object to impart education and thus Institutions are not ‘dealer’ under VAT

Banasthali Vidyapith (the Petitioner) is a institution imparting education primarily to female students and has claimed that they are not carrying on any trade, commerce or business but only carrying on the activity of imparting education. The Petitioner is registered under Section 12AA of the Income Tax Act, 1961 and it is a public society formed and registered on March 16, 1951 under the provisions of Indian Societies Act, 1860 and also under Rajasthan Societies Act, 1958.

The Departmental survey of the Petitioner premises on December 12, 2012 revealed that for the Assessment Years 2007-08 to 2012-13, the Petitioner provided material namely cement, iron and steel to the contractors for constructing its premises or/and maintenance of the properties being owned by it (“Supply of Material”). The Petitioner also sold prospectus to the prospective students who wanted to seek admission in the institution (“Sale of Prospectus”). The Revenue contended that Supply of Material to the Contractors and reducing the value of the same from the Contract amount and Sale of prospectus is ‘Sale’ liable to the Rajasthan Value Added Tax (“RVAT”) under Entry 104 and the Petitioner being a dealer is liable to get registered under the Rajasthan Value Added Tax Act, 2003 (“RVAT Act”).

Thereafter, the Assessing officer held that the Petitioner is liable to be registered under the category of ‘Obligatory Registration’ under Section 11 of the RVAT and also imposed penalty on account of non-registration, which was further upheld by the first Appellate Authority.

Being aggrieved, the Petitioner preferred an appeal before Rajasthan Tax Board, who held that the Petitioner does not fall in the purview of ‘dealer’ under Section 2(11) of the RVAT as it does not carry on any business. Further, the Petitioner is not carrying on any business as the primary and dominant activity is of imparting education which cannot be said to be business.

Being aggrieved, the Revenue preferred a revision Petition before the Hon’ble High

Court of Rajasthan.

The Hon’ble High Court of Rajasthan relying upon the judgments in case of N.M. Goel & Co. Vs. STO, Rajnandgaon and Anr. [1989 (1) SSC 335] allowed the appeal in favour of the Petitioner and held that imparting of education which is the main activity of the Petitioner cannot be said to be in the nature of business activity, a trade, commerce or manufacture, therefore the Petitioner is not a ‘dealer’ liable to ‘Obligatory Registration’ under Section 11 of the RVAT.

The Hon’ble High Court further held that it is well settled that if the main activity is not business, then the connected, incidental or ancillary activities would not normally amount to business unless an independent intention to conduct business in these connected, incidental or ancillary activities is established by the Revenue. Moreover, in the instant case, the Petitioner is a deemed University and publication of ‘prospectus’ and making it available to students is ancillary, incidental and essential to its main and predominant object to impart education. Hence, it is not a dealer liable to be registered under the Rajasthan VAT Act.

Further, while dealing with aspect of Supply of material, the Hon’ble High Court held that the Petitioner has purchased the material after payment of VAT. Tax having been suffered at the time of purchase by the Petitioner the same material cannot be subjected to another levy on such transfer to the contractor for consumption as levy under RVAT Act is a single point tax.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: [email protected])

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