EXEMPTION TO EDUCATION INSTITUTIONS UNDER GST ON SERVICES PROVIDED TO ITS STUDENTS, STAFF & FACULTY
FAQ 1 – Which Education Institution can claim Exemption under GST?
Reply – An education institution defined under Para 2 (y) of the Notification No. 12/2017 – Central Tax (Rate) as noted below is eligible to claim exemption under GST:-
(y) “educational institution” means an institution providing 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 recognised by any law for the time being in force;
(iii) education as a part of an approved vocational education course;
FAQ 2 – What is the Rate of GST on Services Provided by an Education Institution to its Students, Staff and Faculty?
Reply - NIL : As per the Entry at S. No. 66 of Notification No. 12/2017 – Central Tax (Rate), Services Provided by an Education Institution to its Students, Staff and Faculty are liable to NIL Rate of GST.
FAQ 3 – Is this exemption includes Catering Service, Supply of Food and Transportation Service by an education institution to its Student, Staff & Faculty?
Reply – All services provided by an Education Institution directly to its Students, Staff and Faculty are exempted including the above.
FAQ 4 – Is the services provided by Higher Education Institution (i.e. College and University) to its Students, Staff & Faculty are exempted?
Reply – YES : provided the Education Institution is covered within the definition as discussed in FAQ 1.
FAQ 5 – There is a confusion from Clarification of TRU of CBIC vide Circular No. 28/02/2018 dated 08-01-2018 that GST is payable @ 5% on Mess & Canteen Services for Supply of Food & Drinks?
Reply – This was an interpretation error and the same has been rectified on 18-01-2018 by way of a Corrigendum to Circular No. 28/02/2018 in which it has been clarified as below:-
“2.1 If the catering services is one of the services provided by an educational institution to its students, faculty and staff and the said educational institution is covered by the definition given under para 2(y) of notification No. 12/2017-Central Tax (Rate), then the same is exempt. [Sl. No. 66(a) of notification No. 12/2017-Central Tax (Rate) refers]
2.2 If the catering services, i.e., supply of food or drink in a mess or canteen, is provided by anyone other than the educational institution, then it is a supply of service at entry 7(i) of notification No. 11/2017-CT (Rate) [as amended vide notification No. 46/2017-CT (Rate) dated 14.11.2017] to the concerned educational institution and attracts GST of 5% provided that credit of input tax charged on goods and services used in supplying the service has not been taken, effective from 15.11.2017.”
FAQ 6 – Which Services received by an Education Institution are Exempted?
Reply – As per S. No. 66 of the Notification No. 12/2017 – Central Tax (Rate), following services received by an education Institution are Liable to NIL Rate of GST:-
“Services Provided –
(b) to an educational institution, by way of,-
(i) transportation of students, faculty and staff;
(ii) catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory;
(iii) security or cleaning or housekeeping services performed in such educational institution;
(iv) services relating to admission to, or conduct of examination by, such institution; upto higher secondary:
Provided that nothing contained in entry (b) shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent”
FAQ 7 – What is the meaning of ‘education as a part of curriculum for obtaining a qualification recognized by law’?
Reply – 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. Training given by private coaching institutes would not be covered as such training does not lead to grant of a recognized qualification.
FAQ 8 – Are 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 covered in the negative list entry?
Reply – No. To be covered in the negative list a course should be recognized by an Indian law.
FAQ 9 – What will be the treatment in case of Bundled Supply or Mixed Supply of Service by an Education Institution e.g. Boarding & Lodging Service by Boarding Schools?
Reply – Boarding schools provide service of education coupled with other services like providing dwelling units for residence and food. This may be a case of bundled services if the charges for education and lodging and boarding are inseparable. Their taxability will be determined in terms of the principles laid down in section 2(30) read with section 8 of the CGST Act, 2017. Such services in the case of boarding schools are naturally bundled and supplied in the ordinary course of business. Therefore, the bundle of services will be treated as consisting entirely of the principal supply, which means theservice which formsthe predominant element of such a bundle. In this case since the predominant nature is determined by the service of education, the other service of providing residential dwelling will not be considered for the purpose of determining the tax liability and in this case the entire consideration for the supply will be exempt.
Let’s take another example where a course in a college leads to dual qualification only one of which is recognized by law. Would service provided by the college by way of such education be covered by the exemption notification? Provision of dual qualifications is in the nature of two separate services as the curriculum and fees for each of such qualifications are prescribed separately. Service in respect of each qualification would, therefore, be assessed separately.
If an artificial bundle of service is created by clubbing two courses together, only one of which leads to a qualification recognized by law, then by application of the rule of determination of taxability of a supply which is not bundled in the ordinary course of business, it shall be treated as a mixed supply as per provisions contained in section 2(74) read with section 8 of the CGST Act, 2017. The taxability will be determined by the supply which attracts highest rate of GST.
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, and therefore treated as composite supply. One relevant consideration in such cases will be the amount of extra billing being done for the unrecognized component viz-a-viz the recognized course. If extra billing is being done, it may be a case of artificial bundling of two different supplies, not supplied together in the ordinary course of business, and therefore will be treated as a mixed supply, attracting the rate of the higher taxed component for the entire consideration.
The Education guide of 2012 for the purpose of service tax has given the following important clarifications in respect of educational services. The same can be gainfully referred to, for the purpose of clarity under the GST regime:
“The supply of placement services provided to educational institutions for securing job placements for the students shall be liable to service tax. Similarly, 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 in relation to campus recruitments. Such services shall also be liable to service tax.”