Dr. Sanjiv Agarwal
While Service Tax is levied on almost services, barring few listed in negative list and exempted services, there are certain sectors which enjoy the special privileges. Education is one such sector which enjoy privilege under Service Tax and rightly so. While services in relation to in school and pre-school education are not taxable at all, being in negative list, higher education as a part of a curriculum for obtaining a qualification recognized by law in India is also not taxable. Similarly, there is no Service Tax on any approved vocational course. There is also a specific exemption for services provided to educational institutions in respect of exempted education by way of renting of immovable property and auxiliary services.
It is however, important is bring out the difference between education and coaching or training as what is not taxable is only ‘education’ and ‘commercial coaching’ shall be liable to Service Tax. For example, if a student is studying for graduate course in commerce (B.com) in a college and also simultaneously pursuing coaching for law entrance exam, his B.com education is exempt from Service Tax but his law related coaching would attract Service Tax @ 12.36 percent. Similarly, only Indian courses are not taxable. Any foreign university course would attract Service Tax.
So far as exemption to education related auxiliary services and concerned, it means any services relating to imparting any skill, knowledge, education or development of 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 but 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, or transportation of students, faculty or staff of such institution.
Owing to prevailing confusions amongst tax payers and rumors, Ministry of Finance has issued a clarification wherein taxability of various services provided to educational institutes has been clarified. There are many services provided to an educational institution. These are described as auxiliary education services and they have been defined in the exemption itself. Such services provided to an educational institution are exempt from Service Tax. For example, if a school or a college hires a bus from a transport operator in order to ferry students to and from school or college, the transport services provided by the transport operator to the school are exempt by virtue of the specific notification. Similarly, services in relation to hostels, house–keeping, security services, canteen etc shall be exempt from levy of Service Tax.
However, this exemption has a catch. These exemptions are available only for educational institutes and not for commercial coaching institutes. Thus, any coaching or training or tuitions aiding the education would not be able to enjoy this exemption.