Tuesday, 7 November 2017

GST on Education Services

Education Services by a trust, society or Section 8 company registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) by way of charitable activities are exempted from GST.
However, what qualifies as 'education' or 'educational institution'? 
What is 'vocational education' or 'auxiliary education services'? 
Read to learn more about what is exempt and what is not!

 What is Education?
  • Education is a process involving training and developing knowledge, skill and character of students by way of normal schooling.
  • GST Act is attempting to strike a fine balance whereby core educational services provided and received by educational institutions are exempt and other services are sought to be taxed at the standard rate of 18%.
  • Auxiliary services received by such educational institutions for the purpose of education up to Higher Secondary level is also exempt from GST
  • Other services related to education, not covered by exemption would be taxed at a standard rate of 18% with full admissibility of Input Tax Credit (ITC) for such taxable services in cases where the output service is not exempt.

·   However, to reiterate, services by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) by way of charitable activities are exempted from GST.

Education Services are covered under forward charge and thus GST must be paid by the supplier of services, though charged to the receiver of the service. In other words the onus of compliance is on the provider of education services.

What is Educational Institution?

Educational Institution means an institution providing services by way of:
1. Pre-school education and education up to higher secondary school or equivalent;
2. Education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force;
3. Education as a part of an approved vocational education course

As per Notification No. 12 CTR dated 28th July 2017, an “approved vocational education course” means:
(i) A course run by an industrial training institute or an industrial training center 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
(ii) 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.

In light of the above, conducting degree courses by colleges, universities or institutions which lead to grant of qualifications recognized by law would be exempt under GST.

However, training given by private coaching institutes or other unrecognized institution or self-styled educational institution would not be exempted as such training does not lead to grant of a recognized qualification.

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 are also not exempted because the course / degree not recognized by Indian Law.

Education Services are classified in heading 9992 and are further sub-divided into six groups comprising:
  1. Pre-primary education services
  2. Primary education services
  3. Secondary Education Services
  4. Higher education services
  5. Specialised education services
  6. Other education & training services and educational support services
GST Rates for education sector are mentioned in:
  1. Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and
  2. Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017
Chapter/ Section/Heading
Description of Service
Rate / Notification
9992
Education Services
18% as per serial no 30 of notification no. 11 CTR dated 28thJuly 2017

9992


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; up to 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

NIL as per serial no 66 of notification no. 12 CTR dated 28th July 2017
9992
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 programmes, except Executive Development Programme: –
(a) two year full time Post Graduate Programmes 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.

NIL as per serial no 67 of notification no. 12 CTR dated 28th July 2017
90 or any Chapter
Technical aids for education, rehabilitation, vocational training and employment of the blind such as Braille typewriters, Braille watches, teaching and learning aids, games and other instruments and vocational aids specifically adapted for use of the blind Braille instruments, paper etc.

5% as per serial No. 257 of Schedule I of the Notification No. 1 CTR dated 28th June, 2017
9023
Instruments, apparatus and models, designed for demonstrational purposes (for example, in education or exhibitions), unsuitable for other uses
28% as per serial No. 191 of Schedule IV of the Notification No. 1 CTR dated 28th June, 2017


  • Hence, services provided by an educational institution to students, faculty and staff are exempt.
  • The output services of lodging/boarding in hostels provided by such educational institutions which are providing pre-school education and education up to higher secondary school or equivalent or education leading to a qualification recognized by law, are also fully exempt from GST.
  • Annual subscription/fees charged as lodging/ boarding charges by such educational institutions from its students for hostel accommodation therefore, does not attract GST.
  • Input services like canteen, repairs and maintenance etc. provided by private players to educational institutions are subject to GST.
  • As output services are exempted, the Educational institutions may not be able to avail credit of tax paid on the input side.
  • Auxiliary education services (entry no 66 of notification no. 12), if provided to educational institutions providing degree or higher education, the same would not be exempt from GST.
  • The supply of placement services provided to educational institutions for securing job placements for the students shall be liable to GST.
  • 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 GST.


What is 'Place of Supply' in education sector where BOTH the location of supplier of services and the location of the recipient of services is in India?
As per section 12(6) of the IGST Act, 2017, the place of supply of services provided by way of admission to an educational or any other place and services ancillary thereto, shall be the place where the event is actually held or such other place is located.
As per section 12(7) of the IGST Act, 2017, the place of supply of services provided by way of:
(a) organization of a cultural, artistic, sporting, scientific, educational or entertainment event including supply of services in relation to a conference, fair, exhibition, celebration or similar events; or
(b) Services ancillary to organization of any of the events or services referred to in clause (a), or assigning of sponsorship to such events:
(i) To a registered person, shall be the location of such person;
(ii) To a person other than a registered person, shall be the place where the event is actually held and
(iii) if the event is held outside India, the place of supply shall be the location of the recipient.
Place of supply of Educational Services where the location of the supplier of services or the location of the recipient of services is outside India, the place of supply will be the place where the event is actually held.

Composite and Mixed Supply in Education sector
·        If in Boarding schools, charges for education and lodging and boarding are inseparable then it exempt from GST.

     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.


The Government of India too has issued a detailed note with regard to GST on Education Services.
To read the note, please click on the following link:


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