Amit Mundhra, FCA, ISA(ICAI)
Education sector is one of the most important sectors in the Indian Economy in terms of the quantum of finances involved. Taxation on educational institutions has always been a matter of various issues and disputes. I am summarizing below the provisions under the Service Tax Laws as applicable to Educational Institutions as amended by Finance Bill 2013.
There are 2 types of tax provisions in terms of educational institutions under the service tax laws.
- Services provided BY the Educational Institutions
- Here educational Institution is Service Provider
- Here educational Institution is Service Provider
- Services provided TO the Educational Institutions
- Here educational Institution is Service Receiver
There are different provisions for above 2 cases. In this article I will try to summarize the provisions relating to Services Provided by the Educational Institutions.
SERVICES PROVIDED BY THE EDUCATIONAL INSTITUTIONS
Generally educational institutions collects charges and fees under different heads from the students and other persons. Broadly these heads can be illustrated as below.
- Admission Fees
- Tuition Fees
- Prospectus Charges / Admission Form Charges
- Sale of Books and Uniforms
- Examination Fees
- Computer Fees
- Hostel Fees
- Day Boarding Charges
- Digital Classroom Fees
- Mess/ Canteen Charges
- Transportation Charges
- Renting of Auditoriums/ Halls
- Staff Quarter Charges.
- Extra Curricular Activities Charges
- Picnic Fees / Special Tour Charges
- Library Fees
I am examining the applicability of service tax on such charges under various provisions of service tax law.
DEFINITION OF SERVICE
In the Finance Act 2012, for the first time term “service” has been defined in the act :
[Section 65b(44)]
“Service means any ACTIVITY carried out by a person for another for CONSIDERATION, and includes a DECLARED SERVICE, but shall not include;
(a) An activity which constitutes MERELY,
(i) A transfer of title in GOODS or IMMOVABLE PROPERTY, by way of sale, gift or in any other manner; or
(ii) Such transfer, delivery or supply of any goods which is deemed to be sale within the meaning of clause (29A) of article 366 of the Constitution, or
(iii) A transaction in money or ACTIONABLE CLAIM
(b) A provision of service by an employee to the employer in the course of or in relation to his employment.
(c) Fees taken in any court or tribunal established under any law for the time being in force.
The educational services provided by educational institutions clearly fall within the ambit of definition of Service. For detailed analysis of Definition of Service, you can refer to my earlier article by following this link (Click Here)
EDUCATIONAL SERVICES IN THE NEGATIVE LIST
Negative list of service tax signifies the services on which Service Tax is not Chargeable.
As per Section 66D clause (L), which governs the Negative List, following entry appears;
(i) Pre-school education and education upto higher secondary school or equivalent.
(ii) Education as a part of 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.
Definition Of Education
The term “Education” has not been defined in the Service Tax Laws. So, we should go by the dictionary meaning and general meaning of this term.
As per www.dictionary.com the word “Education” means:
1. The act or process of imparting or acquiring general knowledge, developing the powers of reasoningand judgment, and generally of preparing oneself or others intellectually for mature life.
2. The act or process of imparting or acquiring particular knowledge or skills, as for a profession.
3. A degree, level, or kind of schooling: a university education.
4. The result produced by instruction, training, or study: to show one’s education.
5. The science or art of teaching; pedagogics.
Thus, the term Education is a term of wide range and it should be understood in a wide manner.
ANALYSIS OF CLAUSE (L) IN NEGATIVE LIST – SEC. 66D
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Clause (L) of Negative List |
Implication |
| (i) Pre-school education and education upto higher secondary school or equivalent.
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| (ii) Education as a part of curriculum for obtaining a qualification recognized by any law for the time being in force.
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| (iii) Education as a part of an approved vocational education course.
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In above clauses, clause (i) and (ii) are more or less self explanatory but clause (iii) covers approved vocational education course which requires further analysis as below.
Meaning of Approved Vocational Education Course
|
Definition before Enactment of Finance Bill 2013 |
Definition after enactment of Finance Bill 2013 |
| (i) A course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training offering courses in designated trades notified under the Apprentice Act, 1961 | (i) A course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training or State Council of Vocational Training, offering courses in designated trades notified under the Apprentice Act, 1961
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| (ii) A modular employable skill course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Employment and Training, Union Ministry of Labour and Employment | (ii) A modular employable skill course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Employment and Training, Union Ministry of Labour and Employment
|
| (iii) A course offered by an Institute affiliated to the National Skill Development Corporation set up by Government of India. |
- By Finance Act 2013, in the definition of “Approved Vocational Education Course” the courses offered by Industrial Training Institutes or Industrial Training Centres affiliated by State Council of Vocational Training has been included.
- By Finance Act 2013, in this definition, the courses offered by an Institute affiliated to the National Skill Development Corporation has been deleted. Thus in affect, the courses offered by such institutes have now been brought into the Service Tax Net w.e.f. enactment of Finance Act, 2013.
Now if we go through the charges collected by educational institutions, such fees which is charged in respect of educational services as specified in clause (l) of negative list will not be charged to service tax. Going by the wider meaning of “education” charges relating to Admission Fees, Tuition Fees, Examination Fees, Computer Fees and Digital Classroom Fees falls into the negative list and are not subject to charge of service tax.
EDUCATIONAL SERVICES IN THE EXEMPTION LIST
Service Tax notification No. 25/2012 dated 20-06-2012 as amended by Service Tax Notification No. 03/2013 dated 01-03-2013 covers all the exemption available under the Service Tax Provisions. Point numbers. 4, 8, 9, 18, 19, 23 and 35 in said notification covers the exemptions relevant to Educational Institutions in respect of services provided by them.
I am trying to summarize all the exemptions available to Educational Institutions as Service Providers under these respective points.
POINT NO. 4 OF MEGA EXEMPTION NOTIFICATION
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Services by an entity registered under Section 12AA of the Income Tax Act |
By way of Charitable Activities |
Relevant Definitions
|
Term |
Definition |
|
“Charitable Activities” |
Clause (k) of Definitions part of mega exemption notification defines this term “Charitable Activities” as follows. (As amended on 01-03-2013)
“Charitable Activities” means activities relating to – (i) public health by way of – (a) care or counseling of (i) terminally ill persons or persons with severe physical or mental disability (ii) persons afflicted with HIV or AIDS, or (iii) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or (b) public awareness of preventive health, family planning or prevention of HIV infection; (ii) advancement of religion or spirituality; (iii) advancement of educational programmes or skill development relating to,- (a) abandoned, orphaned or homeless children; (b) physically or mentally abused and traumatized persons; (c) prisoners; or (d) persons over the age of 65 years residing in a rural area; (iv) preservation of environment including watershed, forests and wildlife; |
Important Points :
- Mostly all the educational institutions are registered under Section 12AA of the Income Tax Act by way of Charitable Organizations.
- But under service tax law, entities registered under Section 12AA of Income Tax Act doing Charitable Activities which are covered in above definition only are eligible for exemption from Service Tax.
- Thus, mere registration u/s 12AA of the Income Tax Act does not grant said entity exemption from Service Tax.
- If we go through the definition, only educational programmes or skill development relating to abandoned, orphaned or homeless children, physically or mentally abused and traumatized persons, prisoners or persons over the age of 65 years residing in a rural area are covered as “charitable activities” and exemption will be available only in respect of these services.
POINT NO. 8 OF MEGA EXEMPTION NOTIFICATION
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Services by way of Training or Coaching |
In Recreational Activities Relating to Arts, Culture or Sports |
Important Points
- In this point, services relating to training or coaching in recreational activities such as dancing, painting, sports etc. which are relating to Arts, Culture or Sports are exempted. Such services may be provided by Educational Institutions in addition to their normal educational curriculum.
- Thus, by virtue of this entry, the charges for Extra Curricular Activities received by educational institutions, if such activities fall into Art, Culture or Sports category, are eligible for exemption from service tax under this clause.
POINT NO. 18 OF MEGA EXEMPTION NOTIFICATION
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Services by way of Renting of a Hotel, inn, guest house, club, campsite or other commercial places Meant for Residential or lodging purpose |
Having declared tariff of a unit of accommodation below ruppes one thousand per day or equivalent |
Meaning Of Relevant Terms
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“Renting” |
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.
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“Declared Tariff” |
Clause (n) of Definitions part of Mega Exemption Notification defines “Declared Tariff” as under “Declared Tariff” Includes charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit. |
Important Points
- In this point, services relating to Hostel or renting of Hall or Auditorium, provided by Educational Institutions will be covered. If the declared tariff / rental of the property is Rs. 1000/- per day or more, then only service tax is chargeable otherwise, it will be exempt under this entry.
However, here it is worthwhile to mention the Point No. 9 of the Mega Exemption Notification.
POINT NO. 9 OF MEGA EXEMPTION NOTIFICATION
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Services Provided TO An Educational Institution In respect of Education Exempted from Service Tax
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By Way of (a) Auxiliary educational services (b) Renting of immovable property |
Important Points
- Here, the significance of this point is, if the Educational Institution is providing Renting service to another Educational Institution, then such service will be exempted under this point no. 9.
CLAUSE (M) OF NEGATIVE LIST – SECTION 66D
Here, it is also worthwhile to mention the clause (m) of Section 66D which covers negative list under Service Tax.
(m) Services by way of renting of residential dwelling for use as residence.
Thus, the renting of a residential dwelling for use of residence is covered under negative list and is not chargeable to service tax.
By virtue of this point, the charges collected by educational institutions from Staff Quarters will not be chargeable under Service Tax.
POINT NO. 19 OF MEGA EXEMPTION NOTIFICATION
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Services Provided in relation to Serving of Food or Beverages By A Restaurant, eating joint or a mess
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Other than those having The facility of air-conditioning or Central air heating in any part of establishment At any time during the year. |
Important Points
- In this point, services relating Mess, Canteen etc provided by Educational Institutions will be covered. If such mess or canteen are air-conditioned then service tax will be levied otherwise exemption can be claimed under this entry.
POINT NO. 23 OF MEGA EXEMPTION NOTIFICATION
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Transport of Passengers, With or without accompanied belongings BY |
(i) Air embarking from or terminating in an airport located in the state of Arunanchal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or a Bagdogra located in West Bengal.
(ii) A contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire; or (iii) Ropeway, cable car or aerial tramway. |
Meaning Of Relevant Terms
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“Contract Carriage” |
Clause (m) of Definitions part of mega exemption notification defines “Contract Carriage” as “Contract Carriage” has the meaning assigned to it in clause (7) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988)
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“Contract Carriage” As per Section 2(7) of Motor Vehicles Act, 1988 |
Contract Carriage means a motor vehicle which Carries a passenger or passengers for hire or reward and is engaged under a contract, whether express or implied, for the use of such vehicle as a whole for the carriage of passengers mentioned therein and entered into by a person with a holder of a permit in relation to such vehicle or any other person authorized by him in this behalf on a fixed or an agreed rate or sum – (a) On a time basis, whether or not with reference to any route or distance; or (b) From one point to another
And in either case, without stopping to pick up or set down passengers not included in the contract anywhere during the journey and includes (i) A maxi cab, and (ii) A motor cab notwithstanding that separate fares are charged for its passengers;
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Important Points
- This point covers the educational institutions which are providing transport services to its students or staff, the clause (ii) of point no. 23 of mega exemption notification will be applicable.
- Here, it is important to understand the meaning of Contract Carriage. For a vehicle to be classified as a contract carriage, should satisfy all of the following conditions.
- Vehicle carries passengers under a contract (whether express or implied)
- There is a pre determined specific list of passengers who use the transportation facility
- Transportation is fixed between one point to another and can be different for each passenger.
- Vehicle operator cannot pickup or set down any person other than the list of passengers in the contract.
Generally, the transport facilities provided by educational institutions satisfies all the above conditions and they generally fall into the definition of “Contract Carriage”. Thus by virtue of this point, the transport facility provided by educational institutions to its students and staff will be exempt.
However, there is a fine exception here.
If we again look at the clause (ii) of point no. 23 of mega exemption notification, there is a exclusion in the point which is highlighted below.
Clause (ii) : A contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire;
It means that Contract carriage used for tourism, conducted tour, charter or hire cannot claim the benefit of exemption under this point, and they will have to pay service tax on such receipts.
Normally, there are cases, where an education institution takes its students for tour under tour packages using the services of Contract Carriage, and charges separately for such tour from the students. In my view, the Educational Institutions cannot claim the exemption from service tax on such charges received from students under this point no. 23.
POINT NO. 35 OF MEGA EXEMPTION NOTIFICATION
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Services of Public Libraries |
By way of lending of books, publications, or any other knowledge enhancing content or material
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Important Points
- This entry is self explanatory, which governs the library fees received by educational institutions.
CLAUSE (E) OF NEGATIVE LIST – SECTION 66D
Clause (e) of Section 66D – which is Negative List is as under
(e) Trading of Goods
- This clause governs the amount charged by educational institutions towards, books, uniforms and other material which are covered in the definition of Goods. Such charges are not subject to charge of service tax by virtue of this entry.
I have tried to compile the provisions of Negative List and Mega Exemption Notification which are relevant to Educational Institutions considering the services which are generally provided by them. If there is an omission about any kind of service which is provided by such institutions, please let me know, I will try to update it in this article.
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Amit Mundhra, FCA
Author is a member of ICAI and can be reached at amit.mundhra@gmail.com
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.
Dear Sir
we are constructing a new building for rural self employment training institutes(RSETI) established by lead bank of the district imparting vocational courses on employment generation affiliation/under ageis of ministry of rural development GOI,
Do i need to pay service tax for the above work??
Kindly suggest
Regs
Mahesh
Jubilee Kanya Shala a grantable school is getting class rooms constructed fro a engineer. whether school has to pay service tax on construction as a service receiver?
sir
insurance charges collected from students separately by school will be an auxillary service or not and chargeable or not?
we have a annual maintenance contract of air-conditioners and watercoolers installed at a college . kindly clarify whether we should charge service tax foe our services or not. is the college exempt from our services.
Dear Sir,
I have completed PGDC from Nation Power Training Institute under ministry of power, i took 12.36% service tax from all students for every service given by them like tuition fees, Hostel fees & Bus service. Its comes under Service tax.
Please reply.
Thank you
if mess and canteen managed by university and college is it compulsory to pay vat on Canteen income ? is it compulsory to pay vat on Mess Income? because mess is essential service provided by institute for student. please reply me.
Thank you in advance
Yours Sincerely
Ravi
Whether the running of mess in a college / university hostel is liable to service tax.
Dear Sir
Whether rural self employment training institutes(RSETI) established by lead bank of the district imparting vocational courses on employment generation affiliation/under ageis of ministry of rural development GOI, has to pay any kind of service tax on any of the service being received from its service providers ??????
Are tuition teachers for 7th std coming home and teaching my child liable to pay service tax ?
Please clarify whether service tax on insurance premium paid by an School which owns a bus to transport the students from residence to school and vice versa, the premium paid is exempted under the Auxiliary educational services, Services Provided to An Educational Institution.
sir, I work in Sanjay gandhi PGIMS , lucknow which is a tertiarry care hospital and imparts D.M , M.Ch etc degrees to medical professional as per M.C.I guidelines.
We have hired contract buses for the transportation of staff & students.
besides this SGPGIMS have owned different types of vehicles fleet such as Ambulances, Critical Care ambulances, Hearse car, Ambassador cars, Scorpio, Qualis Maruti Van etc for the transport facility provided to patients and faculty/other staff.
We used to get these institute vehicles serviced and repaired through authorized workshops. These workshops used to Charge Service tax on the Labour component in their bills @ 12.36% and VAT on the spares cost separately .My question is that how can we avail exemption from paying service tax to workshop on their labour component charged after servicing
registraton of hostel in tamil nadu please send procedure to my mail sir
Are we liable to pay service tax on college fee we pay ?
dear sir ,
i am service provider in housekeeping service
As defined in the said notification, “auxiliary educational services” means any services
There are many services provided to an educational institution.
In addition to the services mentioned in the definition of “auxiliary educational services”, other examples would be housekeeping service tax
exemption or no exemption
very confusion clear detail for mega exemption list in clued housekeeping service in outsource service exemption or not exemption
Whether Service Tax will be applicable if the schools provide transport facility to the students through the buses owned by the schools.
Thanks Good articles
The issue raised by Poonam is :-
” The educational institution is collecting money from students for hostel, transport, etc whether the same is taxable in the hands of institutes or not”.
If the educational institution is of the nature mentioned in the Negative List, transportation of students and hostel facilities for students will be exempt as it is of the character of Educational Service.
Dear Sir
please clarify on following:-
The educational institution is collecting money from students for hostel, transport, etc whether the same is taxable in the hands of institutes or not
I TAKEN BUILDING CORRECTION CONTRACT A EDUCATIONAL INSTITUTE
that case the service tax shall be applicable.
kindly clarify weather service tax is applicable to the security services rendered to the hospital and medical colleges
regards
purushothama
we run study tours in india for educational institutions from abroad. our services include booking hotels, buses, guides, organizing workshops and arranging visits and internships with academic institutions/NGOs/etc for the purpose of furthering our client’s educational goals. are we exempt from service tax for the services we provide to these educational institutions?
Vry nice article. Thank u vry much..
Sir, pl also clarify if an ed inst is paying Royalty for franchisee, then is it reqd to pay Service Tax charged by franchiser..
Dear Sir,
The IIT kanpur being the educational institute of national importance. we as a firm of contractor execute various types of electrical contracts services such as laying of cables, electrical wiring, fan & fixtures supplying and installation and various other works contract service..
please clearify the following
1. Is IIT kanpur comes in the perview of the service tax.
2. Please clearify which above mentioned services come under the perview of service tax.
Regards
Virat Awasthi
Dear Sir,
Kindly willing to know whether a post graduation college / institute covers service tax or any other. please inform me the above said category involves in which tax rule. Please do the needful.
Regards
Santhosh
dear sir
thanks for the beautiful article.
i am working in a private unaided recognised senior secondary school.
pl carify the following points
whether the schools have to pay service tax
1. to a tent house and caterer company which provides tents chair carpets tables and other items and also provide snacks refreshments lunch or dinner to the students staff and guests on various functions and events in the school
2. to a company which provides house keeping cleanliness and security personnels to the school
3.to a company which provides computer education to the school students by providing teaching personnles computer machines printers computer stationary etc
4. to a company which undertakes annual maintenance contract where by providing maintenance repair and spare parts of machines like photocopier water coolers r o machines generator etc
to a company which maintains school gardens grounds plantations etc.
with best regards
gulshan
Dear Sir,
The IIT kanpur being the educational institute of national importance. we as a institute excute various type of contracts such as Consturction of buildings, Maintenance of residencs and academic buildings, Horticulure services ( supply of labour & maintening, developing of lawn ), sanitation services, supply of labour for various type of maintenance work in institute, renovation of labs and residences.
please clearify the following
1. Is IITs comes in the perview of the service tax.
2. Please clearify which above mentioned services come under the perview of service tax..
What will be the position if in the case of a Boarding School, the school hostel is run by a private party. That is, the school has given on rent the hostel premises to a private party and the private party is running the hostel providing accommodation and food to students. The tariff is certainly very much below Rs 1000/- per day.
Will the school be liable to pay service tax under Renting of Immovable Property ?
Will the private party be liable to pay service tax under Renting of Immovable Property or Outdoor Catering Service ?
Hello,
I am running educational institute . as per today new concept of SAP based education i took study center one big education institute(which is broadcasting education via satellite) and we are receiver. we are collecting fees behalf of this big institute and on receipt also of big institute and deposit it into our account and transfer to the institute (provider) and they return 50% to us and we pay income tax on it. as till 1st july 2013 they where not collecting fees as they were saying it is exptected for them. so in case we(study center) is liable for the same.
insitute is for CA professional coaching
Sir, Vehicles used for transportation of students are defined as Educational Institution Bus (please see section section 2(11) of the MV Act). Such vehicles have to obtain a permit for plying on roads. So, will it be possible to claim exemption on charges collected from students for transporting them in the School / College Bus.
Thanks for sharing knowledge through a very informative and authoritative artlcle. Please enlighten on ST liability on a Branch of ICAI conducting GMCS, Orintation, IT Training, Coaching for CPT, Inter and Final courses and holding Seminar and Conferences for Members and students.
Very good informative articles. Thank you so much for detailed presentation.
sir,
If service Tax liability is charged by the educational Institution.Then total liability of service tax wiil be charged by Educational Institution by Gardians.
Am I right?
Thanks to all.
Good Collection in one article
Very good artticle. Please give the information, whether service tax is applicable to contractor for construction of pvt. schools or colleges. Please give the detail clarification on this point also.
Very Enlighting And informative Artcle,Thanks For The Great Effort.
Concise & Nice Compilation
No reference of taxability on higher secondary education.
In my view,Service Tax will be applicable if the schools provide transport facility to the students through the buses owned by the schools.
Very informative article regarding service tax
Thank you for the same
An article which really clarifies all the doubts about service tax applicable on educational institute .
very good article to clear all the doubts one have in mind.
please share about services received by an educational institution also.
Excellent presentation.
Thanks, It is very helpfull for the understanding the concept of applicability of service tax on educational organizations.
article is quite clear for clearing the doubts in mind, pl also send me article abour services received by educational institute like transportation of the students , security services, horticulture services , and appointment of staff throgh contractor.
good and detailed article.
Very good and informative article
What about special coaching centres for GMAT,IIT,IAS,GRE ETC,
Some are done by govt agencies others in private sector
Subrahmanyam
What if the schools provide transport facility to the students through the buses owned by the schools.In that case the service tax shall be applicable.
Thank You Sir for the article.
Very Good articles – Thanks a lot for detailed and neat presentation. Hats off.