GST: Education & Training To Commercial Pilots As Per DGCA Syllabus Taxable Service, says AAAR

The Appellate Authority for Advance Ruling(AAAR Uttar Pradesh)has stated that Education & Training to Commercial Pilots as per DGCA Syllabus Taxable Service.

The Appellant is a group company of Inter Globe Enterprises Limited which is engaged in the business of facilitating the training of commercial pilots on the Aircraft Stirriulators installed at its training facilities in accordance with the training curriculum approved by the Directorate General of Civil Aviation for obtaining the extension of Aircraft Type Ratings on their existing licenses.

The Appellant is an Approved Training Organization by DGCA in Noida Uttar Pradesh wherein ATR training courses are provided to independent pilots who are already holding their commerical pilots license as per DGCA approved syllabus and manual.

Based on the aforesaid facts the appellant had presented following question to seek advance ruling.

” Whether the supply of education and training services to commercial pilots in accordance with the training curriculum approved by the DGCA for obtaining the extension of ATRs on their existing license would be covered under SI.No. 66(a) of the Notification No. 12/2017 dated 30.06.2017, and thereby exempt from levy of CGST & UPGST”.

In view of the foregoing, the issue before us to decide is whether the Appellant qualifies to be an educational institution and if so whether they are entitled to the benefit of entry number 66(a) of Notification 12/2017 or not. We observe that the services provided by an educational institution to its students, faculty and staff, covered under heading 9992 or 9963, are exempt unconditionally under entry number 66(a) of Notification 12/2017 supra. “Educational institution”, for the purpose of this notification means an institution providing services by way of education as a part of a curriculum for obtaining a qualification recognized by law for the time being in force. Therefore an institution becomes an Educational institution only when the services provided by them are

(i) part of a curriculum,

(ii) the services yield a qualification and

(iii) the said qualification must be recognized by law for the time being in force.

It is observed that the Commercial Pilot’s Licence (CPL) is granted to the concerned on undergoing the basic flight training at flying schools, which enables them to fly only small aircrafts. The CPL per se does not allow or permit the holder to fly commercial passenger aircrafts, unless the holder undergoes an aircraft specific training which is called “type rating training”. Thus the holders of CPL are allowed to fly commercial passenger aircrafts only after undergoing the aircraft specific type rating training and after the license is endorsed to that effect.

The Appellant with regards to the “qualification”, quoting the definitions, of Advance Law Lexicon by P Ramanatha Aiyar i.e. “the fitness or capacity of the party for a particular pursuit or profession, whether such capacity is natural or acquired through training” and that of Black’s Law Dictionary i.e. “possession by an individual of the qualities, properties, or circumstances, natural or adventitious, which are inherently or legally necessary to render him eligible to fill an office or to perform public duty or office”, submitted that in the legal parlance, qualifications do not refer to the mere possession of degrees, diplomas etc., but the possession of skills, accomplishments etc., which have been acquired through training or education and which confer upon a person the ability to undertake a particular profession or pursuit. Further, in the instant case the impugned training program provides the flying experience that is required for applying for an ATR extension in terms of Schedule II to the Aircraft Rules.

The Appellant, with regards to the term “recognized by law”, submitted that the said term is not defined under the GST Law and thus has to be examined; in the case of Indian Institute of Aircraft Engineering Vs Union of India, 2013(30) S;T.R. 689(Del) wherein it is held that the expression “recognized by law” is a very wide one, as compared to the expression “conferred by law”, and even if a certificate / degree / diploma / qualification is not the product of a statute but has approved of some kind in law’, the same would be exempt; the term ‘recognise is defined in Black’s Law dictionary, as the confirmation of an act done by another person as authorized, or formally acknowledging the existence and in the Concise Oxford Dictionary as acknowledging the existence, validity or legality of something; Hon’ble Supreme Court in the case of Narsingh Pratap Singh Deu Vs State of Orissa AIR 1964 SC 1 793 held that a law generally is a body of rules which have been laid down for determining legal rights and legal obligations, which care recognized by the courts; in the case of R S Naik Vs AR Antulay (1984) 2 sec 183 it was held that the law includes any ordinance by law, rule, regulation, notification, custom or usage having the force of law and basing on the above contended that a qualification recognized by the law refers to any qualification which derives its authorization from any statute, ordinance, by-law, rule, regulation, notification, custom, usage and so on.

The Appellant contended that the completion of ATR extension training in accordance with the syllabus approved by the DGCA is recognized under the powers granted by the Aircraft Act, the Aircraft Rules and under CAR ( Civil Aviation Requirement) i.e. they are recognized by the law; and that (i) the completion of the ATR extension training and (ii) acquiring the requisite competency from an ATO(Approved Training Organization) are requirements for a person to make an application to obtain an extension of ATR, which is required for such person to be employed as a pilot with any commercial airlines; that the syllabus/training programme of the Appellant is approved by the DGCA for obtaining such ATR extension, and the training programme conducted by the Appellant to certify that the requisite competency has been acquired is in pursuance of such curriculum prescribed by the DGCA and hence the completion of the training programme with the Appellant in accordance with the Aircraft Act, the Aircraft Rules, the ATO CAR and the Appellant’s TPM is in the nature of “a qualification recognized by any law for the time being in force”.

In view of the foregoing the Appellant, concluding their interpretation of law, submitted that the training provided by the Appellant forms education as a part of the curriculum approved by the DGCA and the same is provided for the purpose of completing the ATR extension training at an ATO, as required by the Aircraft Rules, i.e. a qualification recognized under the existing law, which has to be further used for applying for the CPL(A) and such other licenses.

It is observed from the facts of the case that the Appellant undertakes the supply of the ATR extension training services to their trainees as per the agreement. The pilots holding the CPL(A) have to undergo the ATR extension training for the specific type of aircraft(s) so as to fly the said aircraft with the commercial airlines. The Appellant institute is approved by the DGCA to conduct aircraft-specific type rating training courses, as per the curriculum approved by the DGCA. The Appellant issues a course completion certificate once the type rating training is completed. The pilots have to file an application with the DGCA, for extension of ATR, along with the required documents amongst which the course completion certificate is the one as a proof that the said pilot has undergone the training.

We find that the question to be decided before us is as to whether the services provided by the Appellant is part of a curriculum for obtaining qualification recognized by any law for the time being in force. We find that the “The certificate issued by Appellant enables the Commercial Pilots to appear in the written examination conducted by DGCA for issue of Aircraft Type Rating pursuant to the requirement of Schedule II of the Aircraft Rules, 1937.

We observe that there is no statutory requirement for the Course Completion Certificate < by DGCA and that such a certificate only enables the trainee pilot to apply to DGCA for appearing in the examination conducted by it. In fact this examination conducted by the DGCA is the statutory requirement and not the examination by the Appellant. The Appellant is merely coaching / preparing the candidates-for this Type Rating Examination. The Appellant submitted that the trainees acquire required flying experience, for applying for an ATR extension in terms of Schedule II to the Aircraft Rules, on completion of their training and thus the trainees become qualified to appear for the examination conducted by the DGCA.

The DGCA endorses the licences of the trainees who are successful through the said DGCA exam to the effect of type rating of specific aircraft, so as to enable them to pursue their profession as pilot for specific aircrafts. Therefore the Appellant contends that the training program confers skills relating to flying specific aircrafts and thus the completion of the said training program itself becomes a qualification. This contention is not acceptable as the DGCA is not endorsing the licences of the trainees, on the basis of course completion certificate issued by the Appellant, but conducts separate examination. In fact the course completion certificate doesn’t have universal acceptability but is merely a pre-requisite document for submission of the ATR extension application form, prescribed by DGCA, only to show that the required competency has been acquired by the said trainee.

The Appellant claimed that undergoing Type Rating Training is mandatory as per Rule 6A of the Aircraft Rules, 1937. However, it is observed that the said rule prohibits a person from flying an aircraft as pilot unless the said aircraft is included or entered in his licence. There is no specific mention of training in Rule 6A though the training and passing of the prescribed examination is a step in aid for such aircraft rating. Further, Para 5 of Section J, Schedule II of the Aircraft Rules, 1937 specifies the evidence required to be produced by an Applicant for extension of Aircraft Rating. The said provision requires the applicant to produce evidence of having passed written examination in subjects pertaining to aircraft and engines and of having gained experience in flying the aircraft or on approved flying simulators etc.

The candidates who receive training from the Appellant would be subjected to examination / test by the DGCA approved examiner. It is based on the results of these examinations and fulfillment of other prescribed conditions that the DGCA would endorse the type rating of aircraft in the licence of the trainee pilots. Therefore, the course completion certificate issued by the Appellant can’t said to be a certificate which is recognized by law for the time being in force. The fact that such a certificate may be taken into account by the DGCA approved examiner for the purpose of evaluating the experience and content of training will not make it statutory in character.

This view gets affirmed from the Advance Ruling MR/ST/1/2010 dated 4.2.2010 given under Service Tax regime, on the same facts and on same issue, in the case of M/s CAE Flight Training India Pvt. Ltd. Devanahalli Taluk, Bangalore -562110, Karnataka. It is pertinent to mention that the law, under which ruling was given, has changed but the facts and issues raised before the subject authority remains the same i.e. whether “the services provided by the Appellant is part of a curriculum for obtaining qualification recognized by any law for the time being in force.” The question was raised before the DGCA for clarification and the Director (Training & Licensing), DGCA, vide letter dated 17-12-2009 clarified that “The certificate issued by CAE Flight Training (India) Pvt. Ltd., Bangalore enables the Commercial Pilot to appear in the written examination conducted by DGCA for issue of Aircraft Type Rating pursuant to the requirement of series “J” and “M” of Schedule II ( of the Aircraft Rules, 1937. However, there is no statutory provision directly requiring issuance of such a certificate by the training organization”

Now we proceed to examine whether the Type Rating Training by the Appellant enables the trainee to seek employment or undertake self employment directly after such training or coaching. If the trainee can seek employment directly after the training then it can be considered that the training of the institute results into a qualification. Further as per Rule 6A of the Aircraft Rules, no person shall fly as pilot of an aircraft which is not included or entered in the Aircraft Rating of the Licence. Thus a person can fly an aircraft and consequently seek employment with an Airlines company only after his licence has been endorsed with the aircraft rating for the said aircraft by the DGCA Examination. Mere undergoing training with the Appellant without endorsement of the licence by a competent authority will not enable a pilot to fly an aircraft or seek employment. The training does not directly result into an employment or even enable the trainee to undertake self employment.

In view of the foregoing it is clear that the Appellant imparts training to the trainees and thus provides ATR extension services. On completion of the said training the Appellant issues course completion certificate, which is a pre-requisite document for preferring application before the DGCA, who conducts the examination through an approved examiner and on passing of the said exam the DGCA records the said ATR extension in the CPL of the pilots concerned. Thus the training conducted by the appellant does not result into any qualification and it is not recognized by the law.

The Appellant placed reliance on the service tax case of Indian Institute of Aircraft Engineering Vs. Union of India 2013 and in the said case the petitioner was an Aircraft Maintenance Engineering Training School, approved by the DGCA, for providing Aircraft Maintenance Engineering (AME) training and also to conduct examination as per the course approved by the DGCA. These facts are different from the facts of the instant case in as much that the Appellant is not empowered to conduct the examination but impart training and issues completion certificate, which serves the purpose of a document required for filing the application with the DGCA so as to attend the examination. Thus the said case law is not applicable to the facts and circumstances of the case in hand.

The Appellant also referred the Circular No.117/36/2019-GST dated 11.10.2019 wherein a clarification on applicability of GST exemption to the DG Shipping approved maritime courses conducted by Maritime Training Institutes of India to the effect that the Maritime Training Institutes and their training courses are approved by the Director General of Shipping and are recognized under the provisions of the Merchant Shipping Act, 1958 read with the Merchant Shipping (standards of training, certification and watch-keeping for seafarers) Rules, 2014 and thus the said institutes are educational institutions. It is observed that the said institutes are empowered to impart training and certification of the said training in terms of Merchant Shipping Act, 1958 read with relevant rules supra, whereas in the instant case the Aircraft Act and the Aircraft rules did not approve the Appellant as an institute for conduct of examination that yields to or results into a qualification, but only to issue course completion certificate which is useful only as one of the enclosure to file the application for the Type Rating Examination conducted by the DGCA. Further, there is no circular applicable to the said Type Rating training, being given by the Appellant and thus the Circular dated 11.10.2019 relevant to Shipping courses is not relevant in the instant case.

From the foregoing discussions we come to conclusion that the Authority for Advance Ruling have rightly held that the impugned services of the Appellant are not covered under entry number 66(a) of the Notification 12/2017-Central Tax (Rate) dated 28-06-2017, as amended and hence do not qualify for exemption from GST.

Accordingly we rule as under- “We uphold the impugned ruling UP ADRG-14/2022 dated 02.12.2022 passed by the Authority for Advance Ruling against the Appellant.”

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