SERVICE TAX LIABILITY ON EDUCATION INSTITUTIONS
As per our constitution and in accordance with the law – Formal Education (Schooling, recognised Graduation & Post Graduation Courses) in India are ‘not for profit’ activity. In line with this principal, under the negative list regime of the Service Tax Laws effective from 01-07-2012, the government has declared certain services given and received by an Education Institutions as non-taxable (Sec 66 D – Negative List) or Exempted (Mega Exemption Notification – 25/2012).
The exemptions provided to an education institution under the Service Tax Laws are provided below:-
NON TAXABLE SERVICE – NEGATIVE LIST (Sec. 66 D)
Under Service Tax, following services are declared as non-taxable under clause (l) of Section 66 D of the Finance Act, 1994:-
“services by way of –
(i) pre-school education and education upto 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;”
EXEMPTED SERVICES – MEGA EXEMPTION NOTIFICATION (No.25/2012 Dt. 20-06-12)
Under Service Tax, following services of specified description have been exempted generally or subject to such conditions vide notification No.25/2012-ST dated 20th June, 2012, at Sl.no.9 thereof which reads as follows:
“Services provided to an educational institution in respect of education exempted from service tax, by way of,-
(a) auxiliary educational services; or
(b) renting of immovable property;”.
As defined in the said notification, “auxiliary educational services” means any services relating to imparting any skill, knowledge, 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 services relating to admission to such institution, conduct of examination, catering for the students under any mid-day meals scheme sponsored by Government, or transportation of students, faculty or staff of such institution.
In addition to the services mentioned in the definition of “auxiliary educational services”, other examples would be hostels, housekeeping, security services, canteen, etc that are exempted from Service Tax. In this regard a clarification has also been issued by TRU – CBEC vide Circular No.172/7/2013 – ST dated 19-09-2013.
IS THERE ANY SERVICE ON WHICH AN EDUCATION INSTITUTION IS LIABLE TO PAY SERVICE TAX?
Yes, in our opinion as per the definition of the “auxiliary educational services” mentioned above, services which are other than those which the educational institution can ‘carry out themselves’ are not covered under the Mega Exemption Notification and the Service Provider is liable to charge Service Tax on those services rendered to an Educational Institution. For e.g. service of Professionals like Chartered Accountants, Auditors, Architects, Consultants (other than educational) etc.