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 |
The bill does not say from who is laible to pay.
My question is, i am in my final semester which is from feb 2010 to July 2010. And i hadd paid my full fees in April 2009 for the 2nd(final) Year.
Do i have to pay tax and from when?
Please let me know asap, as my college is asking for exorbent service tax ..
regards,
Rohan
One of the shareholders having substantial interest with voting rights relinquished his rights in the shares under a family partition/arrangement and received money from the company. The income tax department wants to treat this receipt of income under section 2(22)(e) of the Income Tax Act 1961? Whether the Stand of the Department will hold good?
Dr. Arun Draviam
LLB, FCS, MBA, PhD.
March 3, 2010.
Dear Mr. CA Anand Nahar,
I have gone through your article appearing in the Taxguru and the tabular depiction of exempted and non-exempted categories of the services provided by the various entities.
I am not able to agree with your depiction of the undermentioned item:
Special Coaching in addition to coaching for recognised courses Exempt Circular No. 59/8/2003 1/7/2003
I draw your attention to para 2.2 and the sub-paras of Circular no. 59/8/2003 that exempts the service provided by vocational and coaching centers. The para states that vide Notification No. 10/2003-Service Tax dated 20th June, 2003, exemption has been provided w.e.f. 1st July, 2003 to such services rendered by commercial training or coaching centers from service tax which form an essential part of the course or curriculum leading to issuance of recognized certificate, diploma, degree or any other educational qualification. The exemption is subject to the condition that the receiver of such service (for example, student) makes payment for the entire course or curriculum to the institute or establishment issuing such certificate, diploma etc. and not to the commercial coaching or training center.
There is nothing to warrant that special coaching in addition to coaching for recognized courses are exempt from service tax. Surely the special coaching centers would take fees directly from the students studying for the recognized courses and not through/from the recognised institutions and thus they would suffer service tax. Your present depiction is misleading.
Further your contention that the other (non-exempted) vocational training would suffer from the date of Notification of the Finance Bill 2010 is misplaced, since, as stated by you rightly, the Bill seeks to nullify the judicial pronouncements on the subject and seeks to attach liability to tax with retrospective effect from 1.7.2003.
Vocational Training – Other than above Taxable Notification No 3/2010
Date of Passing of Bill ?
Hope you will do the needful to clarify the position.
Yours truly,
Arun Draviam
arundraviam@yahoo.co.in