Finance bill inserted an explanation to Section 65(105) (zzc) and further issued notification no 03/2010 changes the whole gamut of this service.
Earlier the word “commercial” is used in connection with the Institution or organisation who is providing training or coaching and same is upheld by plethora of Judicial Pronouncement like in
Great Lakes Institute of Management Ltd v. CST (2008) 12 STT 296
ICFAI v. CC&CE (2008) 17 STT 501
Centre for Development of Advanced Computing v. CC&CE (2009) 18 STT 361
However the clarifiacatory explanation inserted by Finance Bill 2010 changes the whole understanding of word Commercial retrospectively. The Explanation inserted is
‘Explanation.—For the removal of doubts, it is hereby declared that the expression “commercial training or coaching centre” occurring in this sub-clause and in clauses (26), (27) and (90a) shall include any centre or institute, by whatever name called, where training or coaching is imparted for consideration, whether or not such centre or institute is registered as a trust or a society or similar other organisation under any law for the time being in force and carrying on its activity with or without profit motive and the expression “commercial training or coaching” shall be construed accordingly
Impact of above change
All non profit making organisation or trust or society imparting taxable (service) training or coaching for consideration are under purview of the tax with retrospective effect from 1st July 2003. The impact of all above related case law will nullified automatically.
The second amendment in the definition of “Vocational Training Centre” makes further impact to most of the institutes
Earlier Definition of “Vocational Training Centre” reproduced as (Notification No. 24/2004)
“vocational training institute” means a commercial training or coaching centre which provides vocational training or coaching that impart skills to enable the trainee to seek employment or undertake self-employment, directly after such training or coaching;
Now the definition is amended by Notification No 03/2010 as:
“ vocational training institute” means an Industrial Training Institute or an Industrial Training Centre affiliated to the National Council for Vocational Training, offering courses in designated trades as notified under the Apprentices Act, 1961(52 of 1961).
Before the issue of notification no. 03/2010, the position was all the institutes who were providing vocational training or coaching was not subject to tax for their vocational coaching, now only those institutes who are/will affiliated to the National council for vocational training & offering courses in designated trades are only exempt from tax liability.
|Which Training or Coaching service Centre is Exempt and Which is Taxable|
|Coaching Centre / Institute imparting:||Exempt / Taxable||Basis for Exemption / Taxability||Effective Date|
|Sports Coaching||Exempt||Definition u/s 65(27)||1/7/2003|
|Preschool Coaching i.e. Nursery or Play Homes etc||Exempt||Definition u/s 65(27)||1/7/2003|
|Certificate Course by Recognised Institute||Exempt||Definition u/s 65(27)||1/7/2003|
|Diploma Course by Recognised Institute||Exempt||Definition u/s 65(27)||1/7/2003|
|Degree Course by Recognised Institute||Exempt||Definition u/s 65(27)||1/7/2003|
|Postal Coaching||Taxable||Circular No. 59/8/2003||1/7/2003|
|Coaching at Residence||Exempt||Circular No. 59/8/2003||1/7/2003|
|Training to Employees||Exempt||Circular No. 59/8/2003||1/7/2003|
|Special Coaching in addition to coaching for recognised courses||Exempt||Circular No. 59/8/2003||1/7/2003|
|Recreational Coaching – Dance, Singing, Martial Arts or Hobby Classes||Exempt||Notification No 24/2004||1/7/2003|
|Vocational Training – Provided by Centre Affiliated to National Council||Exempt||Notification No 3/2010||Date of Passing of Bill|
|Vocational Training – Other than above||Taxable||Notification No 3/2010||Date of Passing of Bill|
|Non Profit Organisation||Taxable||Notification No 3/2010||1/7/2003|