GST on Education Services

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CA Kamal Kumar

Introduction

The word “Education” has not been defined under the CGST Act, 2017.
However, the Apex Court decision in the case of “Loka Shikshana Trust vs
CIT” has decided that education is process of training and developing
knowledge, skill and character of students by normal schooling.

Taxing the Education Sector has always been a sensitive issue, as education is seen
more as a social activity than a business one. The Right of Children to Free and
Compulsory Education Act, 2009 has made education not only compulsory but has
also made the Govt. responsible to provide education at economical rates.

Thus, to promote education, it educational services has been exempted from tax.
However, commercialization of education is also a reality. The distinction between
core and ancillary education is hiding and education is now an organized industry
with huge revenues. The GST Act tries to keep a reasonable balance whereby core
educational services provided and received by educational institutions are exempted
and other services are sought to be taxed at the standard rate of 18%.

Levy of GST

As per Section 9 of the Central Goods and Services Tax Act, 2017 (‘the CGST Act,
2017’)/ Section 5 of the Integrated Goods and Services Tax Act, 2017 (‘the IGST Act,
2017’), tax shall be levied on all the forms of supply of goods or services or both,
unless the same is specifically exempted.

The term “supply” has been defined under Section 7(1) of the CGST Act, 2017 as
under:

“For the purposes of this Act, the expression “supply” includes-

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange,
license, rental, lease or disposal made or agreed to be made for a consideration by a
person in the course or furtherance of business;

(b) import of services for a consideration whether or not in the course or furtherance of
business;

(c) the activities specified in Schedule I, made or agreed to be made without a

consideration; and

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(d) the activities to be treated as supply of goods or supply of services as referred to in
Schedule II.”

Further, the term “goods” and “service” are specifically defined under the GST Law as
under:

As per Section 2(52) of the CGST Act, 2017 , “goods” means every kind of movable
property other than money and securities but includes actionable claim, growing
crops, grass and things attached to or forming part of the land which are agreed to
be severed before supply or under a contract of supply;”
As per Section 2(102) of the CGST Act, 2017 , “services” means anything other than
goods, money and securities but includes activities relating to the use of money or its
conversion by cash or by any other mode, from one form, currency or denomination,
to another form, currency or denomination for which a separate consideration is
charged;”

In light of the above, it is pertinent to note that supply is defined in a very exhaustive
manner and includes all form of supply of goods or services or both unless the same
is specifically exempted.

Exemption under GST

Entry Chapter/Heading/Section Description of Services

No.

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66 9992 Services provided –
(a) by an educational institution to its students, faculty and
staff;

(aa) by an educational institution by way of conduct of

entrance examination against consideration in the form of
entrance fee;

(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;

(v) supply of online educational journals or periodicals;

Provided that nothing contained in entry (i), (ii) and (iii) of

item (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.

Provided further that nothing contained in sub-item (v) of

item (b) shall apply to an institution providing services by
way of:-

(i) Pre-school education and education up to higher

secondary school or equivalent; or

(ii) Education as a part of an approved vocational

education course.

67 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 years integrated programme in Management.

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On perusal of the aforementioned Entry No. 66, it is observed that only certain
specified services provided by/to an educational institution are exempt. Thus, services
specified under entry no. 66 are exempted only when the same are provided by/to an
institution which qualifies the definition of an ‘educational Institution’.

Educational Institution has been defined in clause 2(y) of the Notification No.
12/2017- CT(R) dated 28 June 2017 as under:

“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 recognized by any law
for the time being in force;

(iii) Education as a part of an approved vocational education course .”

The sub-clause (i) within the meaning of Educational institutions provides that Schools
including play schools imparting education by way of pre-school education and
education up to higher secondary school or equivalent shall be treated as Educational
institutions. Thus, schools including play schools do not suffer GST on output services
and also on most of the important input services (such as transportation of
students/staff, security services, examination services, catering services). Some of the
input services like canteen, repairs and maintenance etc. provided by private players
to educational institutions were subject to service tax in pre-GST era and the same tax
treatment has been continued in GST regime.

The sub-clause (ii) within the meaning of Educational institutions covers institutions
providing services by way of education as a part of curriculum for obtaining a
qualification recognized by any law for the time being in force. Doubts have
continued as to what would be the meaning of “education as part of curriculum for
obtaining qualification recognized by law” under GST. GST on services being a legacy
carried forward from the Service Tax regime, the explanation given in the Education
guide of 2012 can be gainfully referred to understand the meaning of the term which
reads as under:

♦ What is the meaning of ‘education as a part of curriculum for obtaining a qualification

recognized by law’?

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.

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♦ 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?

No. To be covered in the negative list a course should be recognized by an Indian

law.

Thus, institutions (e.g. Colleges, Universities) providing services by way of education

as a part of curriculum for obtaining a qualification recognized by India Law shall be
treated as Educational Institution. Thus, colleges, universities and other institution
providing education as a part of curriculum for obtaining a qualification recognized by
India Law do not suffer GST on output services. Also, subscription to online
educational journals/periodicals by these educational institution has been exempted
by way of amendment in Entry No. 66 of the exemption notification. However,
training imparted by private coaching institutes would not be covered under the
exemption notification since such training does not lead to grant of a recognized
qualification.

The sub-clause (ii) within the meaning of Educational institutions covers institutions
providing services by way of education as a part of approved vocational course. The
term “approved vocational education course” has been defined under clause 2(h) of
the Notification No. 12/2017- CT(R) dated 28 June 2017 as under:

“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

(iii) 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”

It is to be noted that only those institutions whose operations conform to the specifics
given above would be treated as one and entitled to avail exemptions provided by the
law. Accordingly, 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 fully exempt from GST. Annual subscription/fees charged as
lodging/ boarding charges by such educational institutions from its students for
hostel accommodation shall therefore, not attract GST.

Further, services provided by an educational institution by way of conduct of entrance

examination against consideration in the form of entrance fee has also been exempted
by way amendment in Entry No. 66 of the exemption notification.

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Similarly, output services related to the specified courses provided by IIM’s would be
exempt. Executive Development Programs run by the IIM’s are specifically excluded,
hence such courses would be subject to GST.

Conclusion

GST Law provides exemption to educational institutions providing education up to

higher secondary school or equivalent from the levy of GST. Certain services received
by such educational institutions for the purpose of education up to Higher Secondary
level has also been exempted from GST. Other services related to education, not
covered by the exemption, would be taxed at a standard rate of 18% with full
admissibility of ITC for such taxable services in cases where the output service is not
exempt. In a nutshell, every attempt is made to ensure that the core educational
services are fully exempt from the levy of GST.

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