Amit Mundhra, FCA, ISA(ICAI)

Service Tax on Services Provided to Educational Institutions – After Finance Act 2013

In my previous article, I discussed about Service Tax on Services provided by Educational Institutions. If you have not read it, you can click here to read it.

In this article I am discussing the Service tax provisions in respect to the Services provided TO the Educational Institutions.

An illustrative list of services provided to Educational Institutions

  • Works Contract Services
  • Renting Services
  • Transportation
  • Security Services
  • Information Technology Services
  • Outdoor catering Services
  • Horticulture services
  • Placement agency services
  • Supply of man power services
  • Advertisement Services

I am examining the service tax implications on above services provided to educational institutions.

First of all, let’s discuss the most specific entry relating to services provided to Educational Institution appearing at point no. 9 of Mega Exemption Notification.


Services Provided


An Educational Institution

In respect of


Exempted from Service Tax

By Way of

(i)  Auxiliary Educational Services

(ii) Renting of Immovable Property

Relevant Definitions







“Auxiliary Educational Services”

Point No. (f) of the Definitions part of Mega Exemption Notification defines “Auxiliary Educational Services” as under

“Auxiliary Educational Services”


any services relating to imparting

Any skill, knowledge, education or development


course content

or any other

knowledge – enhancement activity,

whether for the students or the faculty,

or any

other services which educational institutions ordinarily carry out themselves


may obtain as outsourced services from any other person, including services relating to

admission to such institution,

conduct of examination,

catering for the students under any mid-day meals scheme sponsored by Government,


transportation of students, faculty or staff of such institution;






Section 65B(41) of the Finance Act defines “Renting” as

“renting” means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property.

Important Points

  • Definition of “Auxiliary educational services” is a very wide definition and it covers almost all the activities which may be provided to educational institutions by external service providers. Practically, all the services provided to educational institutions will fall within the definition of “Auxiliary educational services”.
  • But, mere inclusion of an activity under the definition of “Auxiliary educational services” does not grant that activity exemption from service tax under this clause. The exemption of “Auxiliary educational services” provided to educational institution is in fact an illusion.
  • If we again look into the starting wordings of this point no. 9, it starts from “Services provided to educational institutions in respect of education exempted by way of……”.
  • Here the phrase “in respect of education” is a very important part of the exemption. By its effect, only those auxiliary educational services which are provided in respect of education will be exempt under this point.

Reference to this point no. 9(i) of mega exemption notification is required in examining the taxability of all kinds of services provided to educational institutions. If we now look at the list of services provided to educational institution as above, the following analysis can be drawn.

Nature of Services Provided to Educational Institution

Covered in Auxiliary Educational Services


Can be said to be provided “in respect of education”


Availability of Exemption under Point No. 9(i) of Mega Exemption Notification


Works Contract Services




Transportation Services




Security Services




Outdoor Catering




Horticulture Services




Placement Agency Services




Supply of Manpower Services




Advertisement Services




*here it is to be noted that above services may be exempted under any other point of mega exemption notification which are being discussed separately.

Clause (ii) of point no. 9 of Mega Exemption Notification

Renting of Immovable Property Service

An educational institution may use Renting Service from other persons. Applicability of service tax in such case may be examined under following points.

  • Point no. 9 of mega exemption notification expressly covers renting of immovable property service provided to an educational institution. Point 9 says “Services provided to an educational institution in respect of education exempted from service tax, by way of …. (b) renting of immovable property.”
  •  Here also, the words “in respect of education” are important words while examining the service tax liability. In strict sense it may be interpreted that if a building is given on rent for running of school/college/institution, then benefit of point 9(ii) can be taken.

Now, let’s discuss the other specific exemption available in respect of various services provided to the educational institutions.

Works Contract Services

An educational institution may use works contract services from external agency for construction of building and any other works for setting up an institution. I have discussed exemption available to service provided under Works contract services in detail in my previous article which you can read by following this link. (Click Here). However, following points needs to be considered for determining taxability of works contract services provided to an educational institution.

  • Works contract service comes under the term auxiliary education services as per point No. 9 of Mega Exemption Notification. But in my view works contract service cannot be said to be provided “in respect of education” as required under said clause. So any person providing works contract service to an educational institution cannot take benefit of clause 9 of exemption notification. However, there may be different views in this.
  • Second specific entry relating to educational institution comes under clause 13(c) of the mega exemption notification which is as under.
  • Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of;
  • (c) a building owned by an entity registered under section 12AA of the Income Tax Act, 1961 and meant predominantly for religious use by general public.
  • Definition of “Religious Place” as per clause (zb) of Definition part of mega exemption notification is “religious place means a place which is primarily meant for conduct of prayers or worship pertaining to a religion, medication or spirituality.”
  • Generally all educational institutions are registered under section 12AA of the income tax act, but there is a second cumulative condition in this clause. The said building should be meant for religious use by general public. If we go by the definition of “Religious Place”, a building owned by an educational institution generally cannot be said to be meant for religious use by general public. Thus a provider of works contract service to an educational  institution cannot take the benefit of exemption under clause 13(c) of mega exemption notification.

Transportation Services

As I have discussed above, though the transportation services are covered under the term “auxiliary education services”, it cannot be said to be provided “in respect of education” and hence exemption under point 9(i) of Mega Exemption Notification will not be available.

However, point no. 23 of Mega Exemption Notification covers this point. This point I have discussed in my previous article in detail. Follow this link (click here) and search “Transportation” on this article.

Point No. 23(ii) reads as; Transport of passengers with or without accompanied belongings by (ii) a contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire;

An educational institution may use own vehicles or may use services from external service provider for transportation of students and staff. There may be following models in such arrangements.

  • Educational Institution use own vehicles to provide transportation services.
  • Educational institution uses services of a vehicle operator and vehicle operator also charges school on per student basis based on distance travelled.
  • Vehicle operator gives his bus on a fixed hire basis say per day/ per month.
  • In both such cases, taxability will be governed by different clauses.
  • If vehicle owner charges on per student basis based on distance travelled, it becomes contract carriage operator under clause 23 and its services provided to school will be exempt under clause 23.
  • However, If vehicle owner charges school on fixed hire basis, then vehicle operator will be out of exemption clause 23 by virtue of the exception provided therein and he cannot take benefit of point no. 23 of the mega exemption notification.

Horticulture Services

An educational institution may use services of a horticulturists/ gardeners for cultivation and up keeping of gardens and plants.

As per Section 66D(d) “Negative List of Services” following entry appears.

Services relating to agriculture or agricultural produce

By way of

 i.            Agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing.

 ii.            …………..

  iii.            ………….

      iv.            ………….. to viii

Definition of relevant terms




Section 65B(3) defines “Agriculture” as

“agriculture” means the cultivation of plants and rearing of all life-forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products



Agricultural Produce

Section 65B(5) defines “Agriculture Produce” as


“agricultural produce” means any produce of agriculture on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market.


The meaning of term “Agriculture” is very wide. Department in its clarification has also provided that following are also included within the ambit of term agriculture.

  • Breeding of Fish
  • Rearing of Silk Worms
  • Cultivation of ornamental flowers
  • Horticulture
  • Forestry.

According to Webster’s dictionary the term “horticulture” means “the art or science of growing flowers, fruits, vegetables and shrubs, especially in gardens or orchards.”

Thus it is quite clear that the horticulture is covered under the term agriculture and services in relation of agriculture and agricultural produce are covered under negative list and hence not taxable.

I have tried to compile the provisions of Negative List and Mega Exemption Notification which are relevant to services provided to the Educational Institutions. Such provisions need to be thoroughly examined for determining the service tax liability on services provided to the educational institutions.

Amit Mundhra, FCA

Author is a member of ICAI and can be reached at

Disclaimer: The views express here in above are based on author’s interpretation of law, which may differ from case to case and person to person. Views expressed above are neither intended nor liable to be used as professional advice or a legal opinion in any manner. The author or publisher is not responsible for the result of any action taken on the basis of this work or for any error or omission to any person.   

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0 responses to “Service Tax on Services Provided to Educational Institutions”

  1. Mahesh Kamath says:

    we have provided work contract services to the RSETI building. Since RSETI is registred as society ..will it entertain service tax??

  2. Ravindra Singh says:

    Hi, Sir, your article was very help full, pls clarify if insurance policy to an school/institute for its students/staff is exempted from service tax.

  3. CA Ankit Jain says:

    Dear CA Amit Mundra

    Your article has very helpful.
    Services provided to Institutions regarding IT software is not “in respect of education” so this not enjoy the benefit of said mega exemption in my view.
    What is your opinion?

  4. K K SARAOGI says:

    Thanks Mr. Amit Mundhra,

    This is a very good and illustrative article on applicability of service tax on services provided to educational institutions by way of auxiliary services not relating to education.

  5. DHEERAJ VERMA says:

    Does conducting of educational counseling or educational campaign attract service tax, please suggest (Dheeraj Verma-9873239965)

  6. Udhayakumar says:

    Any tax if it is imposed to educational institute , they will convert in to fees and in Building fund etc.. it may not be matter, but Govt will get revenue at the cost of citizen’s discomfort.
    Monitoring all education institutes on their admission fees and establishment structure for quality education. Nationalize all Institutes. Regards

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