Tuesday, April 1, 2014

service tax on Educational service

1.      Educational service

1.1.     Definition relating to educational service:
‘Approved vocational education courses’ (Section 65B(11 of Act) means (i) a course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training or the State Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961  ;or (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 Finance act, 2013 has deleted following courses from definition of approved vocational education courses:
(iii) a course run by an institute affiliated to the National Skill Development Corporation set up by the Government of India
‘Auxiliary educational services’: As per the mega exemption notification, auxiliary educational services means any services relating to imparting any skill, knowledge or 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 following services relating to:
·         admission to such institution
·         conduct of examination
·         catering for the students under any mid-day meals scheme sponsored by Government
·         transportation of students, faculty or staff of such institution.
Education as a part of curriculum for obtaining a qualification recognized by law’: As per the mega exemption notification, it means that only such educational services are in the negative list as are related to delivery of education as ‘a part’ of the curriculum that has been prescribed for obtaining a qualification prescribed by law. It is important to understand that to be in the negative list the service should be delivered as part of curriculum. Conduct of degree courses by colleges, universities or institutions which lead grant of qualifications recognized by law would be covered.
1.2.     Exemption under negative list:
As per section 66D(l) of the act, following services would be exempt provided 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 recognised by any law for the time being in force;
(iii)  education as a part of an approved vocational education course;
1.3.     Exemption under mega exemption notification
Exemption under mega exemption notification, 25/2012-ST dated 20.6.2012: As per entry no. 9 following services provided to an educational institution in respect of education would be exempted from service tax:-
(a)     auxiliary educational services; or
(b)     renting of immovable property
Further, Services by way of training or coaching in recreational activities relating to arts, culture or sports would be exempt from service tax. (Entry no. 8)
1.4.     Taxability of services:
Vide Finance act, 2013, services provided by an educational institution by way of auxiliary educational services or renting of immovable property would not be exempt from service tax from 1st April, 2013.
As per Guidance notes on service tax issued by CBEC on 20th June, 2012, following services relating to education would be taxable or exempt from service tax:
·         Training given by private coaching institutes would not be covered as such training does not lead to grant of a recognized qualification.
·         International schools: services provided by international schools giving certifications like IB would also covered in this entry
·         Boarding schools: Boarding schools provide service of education coupled with other services like providing dwelling units for residence and food would be covered in this entry irrespective of charges for education and lodging and boarding are separable or inseparable.
·         Service to or by Educational institutions: services provided to or by an educational institution by way of,-(a) auxiliary educational services; or (b) renting of immovable property, in respect of education exempted from service tax.
·         Auxiliary educational services: The auxiliary educational services for all educational institutions are not exempt. Exemption is available for services to or by educational institutions in respect of education exempted from service tax. Therefore, service tax is chargeable on such auxiliary educational services which are in respect of education chargeable to service tax.
·         Foreign courses: To be covered in the negative list a course should be recognized by an Indian law. Hence, services provided by way of education as a part of a prescribed curriculum for obtaining a qualification recognized by a law of a foreign country would not be covered in the negative list entry.
·         Dual course - recognized and unrecognized courses: Course in a college which leads to dual qualification and only one of which is recognized by law then valuation of such services would be determine by applicable of by application of the rule of determination of taxability of a service which is not bundled in the ordinary course of business contained in section 66F of the Act it is liable to be treated as a course which attracts the highest liability of service tax. However incidental auxiliary courses provided by way of hobby classes or extra-curricular activities in furtherance of overall well being will be an example of naturally bundled course.
·         Placement services: Placement services provided to educational institutions for securing job placements for the students would not be covered in this negative list entry.
·         Fees charged from employer for placement: Educational institutes such as IITs, IIMs charge a fee from prospective employers like corporate houses/ MNCs, who come to the institutes for recruiting candidates through campus interviews. Such services provided by such institutions are taxable services.
Admission test fees: Services of conducting admission tests for admission to colleges provided by educational institution which are providing qualification recognized by law are exempt from service tax.To join google group regular updates or query on service tax send mail to handbookonservicetax@gmail.com
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13 comments:

  1. Whether the internet service availed by a college is exempted from paying service tax?

    ReplyDelete
    Replies
    1. No. It is liable to service tax as of now after amendments in this service.
      Now there is only 4 specified services which if taken by educational body will be exempt from service tax. I.e.

      1. Transport for student and staff
      2. Catering
      3. Security, house keeping and cleaning service in educational body
      4. Service relating to admission to or conduct of exams.

      Rest all taxable.. Even renting of immovable property to or by educational institution is taxable now..
      And auxiliary service clause deleted.

      Delete
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