Dr. Sanjiv Agarwal
W.e.f. 01.07.2012, the concept of Service Tax has changed. What is taxed now is an activity which gets covered under the scope of ‘service’ as defined in section 65B(44) of the Finance Act, 1994 as amended.
Charge of Service Tax on and after 1.07.2012 is defined under section 66B of the Finance Act, 1994. Section 66B states that Service Tax shall be charged at the rate of 12% on value of all taxable services i.e., other than those specified in the negative list or exempted services, which are provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.
Section 66B specifies the charge of service tax which is essentially that service tax shall be levied on all services provided or agreed to be provided in a taxable territory, other than services specified in the negative list. Thus, as per charging section 66B, Service Tax shall be applicable on all services except negative list services or services which are specifically exempt from Service Tax.
Services relating to Education Sector covered under Negative List
Section 66D of the Finance Act, 1994 contains Negative List of Services. The clause (l) of section 66D relates to education related services. The said clause (l) of Section 66D of the Act provides for the following negative list services in relation to educational sector:
Services by way of—
(i) pre-school education and education up to higher secondary school or equivalent;
(ii) education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force;
(iii) education as a part of an approved vocational education course
According to the negative list, there are three categories of education covered under this list and hence non-taxable:
→ Pre-school education – includes play schools, pre-nursery and nursery schools, crèche, day care centre, pre-kindergarten or any such purpose school or centre by whatever name called.
As per www.newworldencyclopedia.org, ‘Preschool education’ is education that focuses on educating children from the ages of infancy until six years old. The system of preschool education varies widely, with different approaches, theories, and practices within different school jurisdictions. The term preschool education includes such programs as nursery school, day care, or kindergarten, which are occasionally used interchangeably, yet are distinct entities. While pedagogies differ, there is the general agreement that pre-school is responsible for providing education before the commencement of statutory education.” In academic parlance, ‘pre-school / early childhood education’ is defined as a pedagogical approach covering the education of children from the period from birth to six years of age.
→ Education upto higher secondary school or equivalent – includes school education which is up to higher secondary (12th standard) or equivalent level (say, intermediate). Any education beyond higher secondary is not covered here. The use of expression ‘equivalent’ provides wider scope to school education implying that all education up to school leaving are in negative list. Even if it is provided by international school providing international certificate, it will be out of Service Tax net.
→ Education as a part of curriculum leading to recognized qualification – unlike school education where any school education is covered, education qualifies for negative list only if certain conditions are met, viz,
(i) education must be imparted as part curriculum
(ii) such education should be for obtaining a qualification (say a degree, diploma, certificate etc.)
(iii) such qualification should be recognized by any law (Indian law only) for the time being in force.
If any of the aforementioned conditions is not satisfied, the education shall not qualify to be under the negative list. The use of words “law for the time being in force” implies that such laws as are applicable in India at a given point of time. In such cases, education is imparted under a prescribed syllabus or curriculum and the education must be imparted as a part of such curriculum, i.e. it must be a part of syllabus for such course or qualification. However, education leading to foreign qualifications shall be liable to payment of Service Tax. In Indian, context, it may be noted that recognition is granted by bodies such as University Grants Commission (UGC), All India Council of Technical Education (AICTE) etc.
→ Approved vocational education course – Approved vocational education course has been defined in section 65B(11) of the Finance Act, 1994. These are –
The admission / examination fee is covered under negative list. Further, tuition fee or development fees are also not liable for Service Tax. When students avail the services of admission / development / examination and pay the fees in respect of such services alongwith basic tuition fee, it may be considered as a case of bundled services where tuition is having dominant nature covered under negative list and accordingly, all other fees charged mandatorily along with tuition fees would not be liable for service tax.
Services not in Negative List
Negative list may, therefore, not include –
a) Private tuitions
b) Education as a part of prescribed curriculum for obtaining qualification recognized by law of a foreign country
c) Services provided to educational institutions (except covered elsewhere)
d) Placement services
e) Services provided by educational Institutes such as IITs, ITMs charge a fee from prospective employers like corporate houses / MNCs, who come to the institutes for recruiting candidates through campus interview.
The inclusion in / exclusion from negative list [section 66D(l) of Finance Act, 1994 ] for different types of education related services can be illustrated as follows :
|Nature of Service||Taxability|
|School education upto 12th standard||Covered under negative list – Not taxable.|
|School examinations fee, etc.||It is part of education and hence covered under the negative list – Not taxable|
|Conveyance facilities to students||If part of education and cannot be separately covered under negative list – Not taxable|
|Approved vocational educational course||Covered under negative list – Not taxable|
|Boarding school (package offered inclusive of food, rent, etc.)||Covered under negative list – Not taxable; Essential character being education, non-taxable as per rule of bundled services|
|College education (affiliated to an Indian university)||Recognized by law, covered in negative list – Not taxable|
|Test for admission in a college / institution||If recognized by law, covered in negative list – Not taxable|
|Campus recruitment fee||Taxable|
|Courses recognized by foreign law||Not covered under negative list – Taxable|
|Coaching centre’s services||Taxable|
|Grants-in-aid||As per Rule 6(2)(vii) of the Service Tax (Determination of Value) Rules, 2006, subsidies and grant disbursed by the Government, not directly affecting the value of service, will be excluded from the value of service – Not taxable|