CBEC issues concept note on GST on Education Services

Education is not defined in the CGST Act but as per Apex Courtdecision in Loka Shikshana Trust v/s CIT, education is process oftraining and developing knowledge, skill and character of students
by normal schooling.
Taxing the Education Sector has always been a sensitive issue, aseducation is seen more as a social activity than a business one.The government has a constitutional obligation to provide freeand compulsory elementary education to every child. Thus, topromote education, it would be beneficial if educational servicesare exempted from tax. However, commercialization of education isalso a reality. The distinction between core and ancillary educationis blurring and education is now an organised industry with hugerevenues. The GST Act tries to maintain a fine balance wherebycore educational services provided and received by educationalinstitutions are exempt and other services are sought to be taxed atthe standard rate of 18%.
Classification of Education Services:
Education Services areclassified in heading 9992 (as per Notification No. 11/2017-CentralTax (Rate)) and are further sub-divided into six groups (as per theAnnexure to the same notification) comprising of Pre-primary,primary, secondary, higher, specialized and other educational &support services as below:

Rate of GST

The rates of GST on education services (as per Notification No.11/2017-Central Tax (Rate), Notification No. 11/2017-Central Tax(Rate) and Notification No. 12/2017-Central Tax (Rate) all dated28.06.2017 as amended) are as below:

Thus, services provided by an educational institution to students,faculty and staff are exempt. Educational Institution means aninstitution providing services by way of:

(i) Pre-school education and education up to higher secondaryschool or equivalent;
(ii) Education as a part of a curriculum for obtaining a qualificationrecognised by any law for the time being in force;
(iii) Education as a part of an approved vocational education course.
Within the term educational institution, sub-clause (ii) coversinstitutions providing services by way of education as a part ofcurriculum for obtaining a qualification recognised by any law for the
time being in force. This is an area where doubts have persisted as towhat would be the meaning of education as part of curriculum forobtaining qualification recognised by law. GST on services being alegacy carried forward from the Service Tax regime, the explanationgiven in the Education guide of 2012 can be gainfully referred tounderstand the meaning of the term which reads as under;

What is the meaning of education as a part of curriculum for obtaininga qualification recognized by law
It means that only such educational services are in the negative list asare related to delivery of education as a part of the curriculum thathas been prescribed for obtaining a qualification prescribed by law.
It is important to understand that to be in the negative list the serviceshould be delivered as part of curriculum. Conduct of degree courses bycolleges, universities or institutions which lead grant of qualificationsrecognized by law would be covered. Training given by private coachinginstitutes would not be covered as such training does not lead to grant ofa recognized qualification.
Are services provided by way of education as a part of a prescribedcurriculum for obtaining a qualification recognized by a law of a foreigncountry covered in the negative list entry
No. To be covered in the negative list a course should be recognized byan Indian law.
Within the term educational institution, sub-clause (iii) coversinstitutions providing services by way of education as a partof approved vocational course, and institutions providing theabove courses will come within the ambit of the term educationalinstitution. Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017, defines approved vocational education course as under:
An approved vocational education course means, –

(i) A course run by an industrial training institute or an industrialtraining centre affiliated to the National Council for VocationalTraining 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 NationalCouncil of Vocational Training, run by a person registeredwith the Directorate General of Training, Ministry ofSkill Development and Entrepreneurship.

It is to be noted that only those institutions whose operationsconform to the specifics given in the definition of the termEducational Institution, would be treated as one and entitledto avail exemptions provided by the law. This would mean thatprivate coaching centres or other unrecognized institutions, thoughself-styled as educational institutions, would not be treated aseducational institutions under GST and thus cannot avail exemptionsavailable to an educational institution.
Thus, educational institutions up to Higher Secondary School level donot suffer GST on output services and also on most of the importantinput services. Some of the input services like canteen, repairs
and maintenance etc. provided by private players to educationalinstitutions were subject to service tax in pre-GST era and the sametax treatment has been continued in GST regime.
Thus output services of lodging/boarding in hostels provided by sucheducational institutions which are providing pre-school educationand education up to higher secondary school or equivalent oreducation leading to a qualification recognised by law, are fullyexempt from GST. Annual subscription/fees charged as lodging/boarding charges by such educational institutions from its studentsfor hostel accommodation shall therefore, not attract GST.
Similarly, output services related to the specified courses providedby IIMs would be exempt. Executive Development Programs runby the IIMs are specifically excluded, hence such courses would besubject to GST.
Regarding, input services, it may be noted that where output servicesare exempted, the Educational institutions may not be able to availcredit of tax paid on the input side. The four categories of services
known as Auxiliary Education services, which educational institutionsordinarily carry out themselves but may obtain as outsourced servicesfrom any other person, have been exempted (as per Notification No.12/2017- Central Tax (Rate)). Auxiliary education services other thanwhat is specified above would not be entitled to any exemption. Theexemption also comes with a rider. Such services are exempt only foreducational institutions providing services by way of education uptohigher secondary or equivalent. (from pre-school to HSC). Thus if suchauxiliary education services are provided to educational institutionsproviding degree or higher education, the same would not be exempt.
For instance, the services of conducting admission tests for admissionto colleges in case of educational institutions are providing qualificationrecognized by law for the time being in force shall not be liable to GST.

Who will pay GST

Education Services are under forward charge. Therefore, GST shall bepaid by the supplier of services.

What will be the Place of Supply of Educational Services where thelocation of supplier of services and the location of the recipient ofservices is in India

As per section 12(6) of the IGST Act, 2017, the place of supply of servicesprovided by way of admission to an educational or any other place andservices ancillary thereto, shall be the place where the event is actuallyheld or such other place is located.
As per section 12(7) of the IGST Act, 2017, the place of supply of servicesprovided by way of, (a) organisation of a cultural, artistic, sporting,scientific, educational or entertainment event including supply ofservices in relation to a conference, fair, exhibition, celebration orsimilar events; or (b) services ancillary to organisation of any of theevents or services referred to in clause (a), or assigning of sponsorshipto 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 placewhere the event is actually held
and if the event is held outside India, the place of supply shall be thelocation of the recipient.

What will be the Place of supply of Educational Services where thelocation of the supplier of services or the location of the recipientof services is outside India

As per section 13(5) of the IGST Act, 2017, the place of supply ofservices supplied by way of admission to, or organisation of acultural, artistic, sporting, scientific, educational or entertainmentevent, or a celebration, conference, fair, exhibition or similar events,and of services ancillary to such admission or organisation, shall bethe place where the event is actually held.

Educational Institution run by charitable organizations

Charitable Trusts running institutions conforming to the definitionof Educational Institution as specified in the notification would beentitled to the exemptions discussed above. Apart from the general
exemption available to all educational institutions, charitableactivities of entities registered under Section 12AA of the Income TaxAct is also exempt. The term charitable activities are also defined
in the notification. Thus, if trusts are running schools, collegesor any other educational institutions or performing activitiesrelated to advancement of educational programmes specificallyfor abandoned, orphans, homeless children, physically or mentallyabused persons, prisoners or persons over age of 65 years residingin a rural area, activities will be considered as charitable and incomefrom such services will be wholly exempt from GST in terms ofNotification No.12/2017- Central Tax (Rate) dated 28th June, 2017.

Composite and Mixed Supply in so far as Education is concerned

Boarding schools provide service of education coupled with otherservices like providing dwelling units for residence and food. Thismay be a case of bundled services if the charges for educationand lodging and boarding are inseparable. Their taxability will bedetermined in terms of the principles laid down in section 2(30) readwith section 8 of the CGST Act, 2017. Such services in the case ofboarding schools are naturally bundled and supplied in the ordinarycourse of business. Therefore, the bundle of services will be treatedas consisting entirely of the principal supply, which means the servicewhich forms the predominant element of such a bundle. In thiscase since the predominant nature is determined by the service ofeducation,the other service of providing residential dwelling will notbe considered for the purpose of determining the tax liability and inthis case the entire consideration for the supply will be exempt.
Lets take another example where a course in a college leads to dualqualification only one of which is recognized by law. Would serviceprovided by the college by way of such education be covered by the
exemption notification Provision of dual qualifications is in the natureof two separate services as the curriculum and fees for each of suchqualifications 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 coursestogether, only one of which leads to a qualification recognized bylaw, then by application of the rule of determination of taxability of a
supply which is not bundled in the ordinary course of business, it shallbe treated as a mixed supply as per provisions contained in section2(74) read with section 8 of the CGST Act, 2017. The taxability will bedetermined by the supply which attracts highest rate of GST.
However incidental auxiliary courses provided by way of hobby classesor extra-curricular activities in furtherance of overall well-being willbe an example of naturally bundled course, and therefore treated as
composite supply. One relevant consideration in such cases will be theamount of extra billing being done for the unrecognized componentviz-a-viz the recognized course. If extra billing is being done, it maybe a case of artificial bundling of two different supplies, not suppliedtogether in the ordinary course of business, and therefore will betreated 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 thefollowing important clarifications in respect of educational services.The same can be gainfully referred to, for the purpose of clarity underthe GST regime:
The supply of placement services provided to educational institutionsfor securing job placements for the students shall be liable to servicetax. Similarly, educational institutes such as IITs, IIMs charge a fee fromprospective employers like corporate houses/ MNCs, who come tothe institutes for recruiting candidates through campus interviews inrelation to campus recruitment. Such services shall also be liable toservice tax.

Conclusion

Education is fundamental to the nation building process. Rightto Education is now a fundamental right of every child in India.GST Law recognizes this and provides exemption to educational institutions, providing education up to higher secondary school orequivalent,from the levy of GST. Auxiliary services received by sucheducational institutions for the purpose of education up to HigherSecondary level is also exempt from GST. Other services relatedto education, not covered by the exemption, would be taxed at astandard rate of 18% with full admissibility of ITC for such taxableservices in cases where the output service is not exempt. In anutshell, every attempt is made to ensure that the core educational
services are fully exempt from GST.