Prior to implementation of GST, Educational services were exempt under Service Tax Regime. With the implementation of GST, Educational Sector needs to be re-assessed with taxability. Primarily Educational Services are seems to be exempt however critical analysis needs to be done whether all educational services are exempt or a selective pool of educational services are exempt. Further it is also to be assessed that which all services will fall under the definition of Education Services provided by Educational Institution or School.
To understand the taxability of Educational Services lets understand various key definition which will help to under complexity relating to educational services:
Education:
Education is nowhere defined under GST law however as per a supreme court ruling education can be referred as “education is process of training and developing knowledge, skill and character of students by normal schooling”.
Educational Institutions:
If any institution or business organisation providing following services would be treated as Education Institutional:
- Pre-school education (Play Schools, Nursery) and education up to higher secondary (upto XIIth) school or equivalent
- Education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force (i.e. Bachelor Degree, Master Degree, CA, LLB, MBBS
- Education as a part of an approved vocational education course (Fashion Designing, Computer Networking, Office Management)
Approved Vocational Education course:
- A course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training or State Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961 (52 of 1961); or
- A Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Training, Ministry of Skill Development and Entrepreneurship
Applicability of GST on Education and Related Services:
On 28th June 2017 government has issued various notifications relating to exemption/taxability of various goods and services. Considering these notifications we found below notification relating to Education and related services:
Notification No. 11/2017-Central Tax (Rate):
Educations Services (At Entry no 30): Liable to tax 18% (Central plus State)
Notification No. 12/2017-Central Tax (Rate):
- At Entry no 60:
Services provided-
(a) by an “educational institution” to its students, faculty and staff;
(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.
- At Entry no 60:
Services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programme, except Executive Development Programme:
(a) two year full time Post Graduate Programme in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT) conducted by the Indian Institute of Management;
(b) fellow programme in Management;
(c) five year integrated programme in Management.
Let’s understand applicability of said notifications:
Notification No. 11/2017-Central Tax (Rate) provides 18% rate for educational services which indicates taxes that all educational services will be taxable at 18%.
Further Notification No. 12/2017-Central Tax (Rate) provides exemptions for certain category of services which means that only selective class of services will be exempt and rest will be taxable at 18%. The intention of law maker is clear that basic education (pre School, Senior & Higher secondary, University Courses, and Approved Vocational) and ancillary services would remain exempt from tax.
On the basis of analysis of above notifications it is clear that following Educational Services will be exempt:
- Pre-school Services by Educational Institution
- Senior and Higher secondary Educational Institution
- Recognised University Courses
- Transportation Facility provided to Student, Faculty and Staff by Educational Institution
- Examination fee charged by Educational Institution
- Vocational Courses by approved Educational Institution
- Lodging/Boarding Services by Educational Institution
Educational Services or Similar services which are not exempt:
- Private Coaching Centre providing classes related to primary, senior secondary, higher secondary, bachelor degree, master degree or professional course
- Sales of stationary
- Training relating to Education or Seasonal Course
- Services provided by Educational Institution through Canteen/mess
- Vocational Course recognised by Foreign Company or by institution authorised by foreign body
What is the rate of GST on Educational Services:
- As per notification no 11/2017-Central Tax (Rate), 18% GST will be applicable on Education services if such services are not exempt by notification no 12/2017-Central Tax (Rate).
- A rate of 5% GST will be applicable on food & beverage (mess or canteen) services provided by Educational Institution
- A rate of 5% GST will be liable to pay on transportation services provided to person other than students, faculty and staff;
What is the place of Supply (POS) for Educational Services:
Section 12 of IGST Act is provides the provisions relating to place of supply of services if location of supplier and recipient in India. Section 12 of IGST Act specifically provides that place of supply in case of education services will be the place where actually provided. it means that location of recipient is irrelevant POS will be the place where such educational services actually executed.
As place of supply will be the place where actually services perform hence generally it will be an intra state supply as generally supplier provides services at their registered place of business.