GST GUIDE FOR EDUCATIONAL ENTITY:

Taxation of Education Services :-

According to Rate Notification of Services, Notification No 11/2017- Central Tax (Rate), Educational Services is given in serial No.- 30. Heading 9992 is for Education Services and its rate is 9% for Central Tax (Also according to correspondence notification of respective state or union territory, 9% for state tax or union territory tax)

List of Education Services with code:

Education Services provided by the Central Government, State Government, Union territory or local authority is Exempted:

According to entry No.-6 of Notification No 12/2017- Central Tax (Rate), except, (a) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory; (b) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (c) transport of goods or passengers; or (d) any service, other than services covered under entries (a) to (c) above, provided to business entities, Services by the Central Government, State Government, Union territory or local authority, is exempted.

Education Services Provided by Trust/Societies/Section 8 Companies having section 12AA of Income Tax Act Registration for Income Tax are not exempted in GST for every cases:

According to entry No.-6 of Notification No 12/2017- Central Tax (Rate), Services by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) by way of charitable activities, Now We have to Know what is charitable Activities as per GST Law. As per Income Tax Act, 1961 some entities like Trust, Society, Company (subject matter of section 8 of Companies Act,2013) make themselves registered u/s 12AA of Income Tax Act and after getting registration, they can avail exemption u/s 11 of Income tax act (Also have to follow the guide of section 12 and section 13 of Income Tax act) as Education is one of the element relating to Charitable Purpose according to section 2(15) of the I.T. Act. But In GST law the meaning of Charitable Activities is not same as meaning of Charitable Purpose in Income Tax Law. According to Notification No 12/2017- Central Tax (Rate), for Educational and skill development purpose, four types are included in meaning of Charitable Activities. Along with others purposes i.e. A) abandoned, orphaned or homeless children, B) physically or mentally abused and traumatized persons, C) prisoners, D) persons over the age of 65 years residing in a rural area.

So We can say entity engaged in providing education services, registered under section 12AA of the Income-tax Act, can avail exemption in GST if it provide services to i) abandoned, orphaned or homeless children, ii) physically or mentally abused and traumatized persons, iii) prisoners & iv) persons over the age of 65 years residing in a rural area otherwise the entity can not avail exemption in GST.

Definition of Educational Institution:- Definition of Educational Institutions is given in Notification No 12/2017- Central Tax (Rate). As per Notification, 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; and (iii) education as a part of an approved vocational education course.

Details analysis of clause (ii) For understanding that clause, we have to know the meaning of education as a part of a curriculum for obtaining a qualification recognized by law and from education guide 2012 in service tax era, we can explain the meaning as 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.

Details analysis of clause (iii) for understanding that clause, we have to find the meaning of approved vocational education course. Notification No 12/2017- Central Tax (Rate) also provide the definition. 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.

Exemption of GST for the entity who covered under Educational Institution according to GST Law :-

Already we can clearly identify the Educational Institution after reading the definition of Educational Institution at the very beginning of that write up.
Now as per Entry No.-66 of Notification No 12/2017- Central Tax (Rate), there are two types of exemptions for Educational Institution regarding services, i.e. Exemptions for Outward Supply of services as well as not to pay GST of Inward Supply of services also.

So if any entity falls under the definition of Educational Institution, following two types exemptions are subject mater:

Item a) Exemption in Outward Supply of services : Service provided by Educational Institution to its students, faculty and staff are exempted. The said services provided to other than its students, faculty and staffs is not exempted. ( Clause added in amendment, aa) Service provided by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee also have exemption)

Item b): Educational Institution not need to pay GST on Inward Supply of services : supply of service to Educational Institution in the form 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, [in amendment clause added, (v) supply of online educational journals or periodicals:] Provided that Provided that nothing contained in [sub-items (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.]

Excluding the above two types, others supplies of services are not exempted of an Educational Institution.

Whether the Educational Institutions need to take GST Registration:
According to provisions of Section 23(1)(a) of CGST Act, if service provided to its students, faculty and staffs only by the person i.e. institution (Consider the Pan as person for calculate the aggregate turnover) then the person need not to take registration as its exempted. But if any supply of goods taken place or any supply of services provided to any other person (Other than its students, faculty and staffs) then after crossing the threshold limit, the person i.e. institution is liable for registration and according to section 22 of CGST Act and have to take registration by using section 25(1) of CGST Act.

Case Study 1) : sale of scrap stationery and used papers may be the factor for taking registration. The term Scrap is not defined in GST Law, so according to business directory Scrap means waste that either has no economic value or only the value of its basic material content recoverable through recycling so its generation may occur from non manufacturing cases also. And its outward supply is supply of Goods and for paper scrap, HSN Code is 4707, attract 5% Tax. So supply of goods taken place so no exemption is there for supply of goods by Educational Institutions so according to meaning of Aggregate Turnover u/s 2(6) of cgst act, its aggregate turnover have to calculate and after supplying scrap, the person can not utilize the provision of section 23(1)(a).

Case Study 2): giving the scrap and take the amount from the purchaser as donation (unconditional) may save the institution from violating section 23(1)(a). as the scraps are given without consideration to a person (purchaser) who is not a related person or distinct person of the institution then the disbursement of scrap is not attract supply according to section 7(1)(a) or section 7(1)(c) of Cgst act. One matter is important that the institution shall prove that the donation given by the scrap purchaser to the institution is unconditional. The unconditional donation is not a consideration according to the definition defined u/s 2(31) of CGST Act. So donation received without making any supply.

Case Study 3): Renting of building, Vehicle to other than its staffs, faculty and students, not subject to exemption. So if the entity having that kind of outward supply then the entity will not enjoy the facility from exemption of obtaining GST registration according to section 23(1)(a).

Applicability of Composite Supply in educational institution (According to Ruling of AAR of Karnataka judgment in the case of M/S Colombia Asia Hospitals Private Limited on 13.11.2018) :

Outward supply of services provided by educational institution are exempted u/s 11 of CGST ACT according to Notification No 12/2017- Central Tax (Rate) and definition Taxable supply includes supply which are leviable to tax and giving exemption u/s 11 hence the exempt supply also fall under Taxable supply. Now if the institution provide any taxable supply of goods (Study Materials) to the students along with principal, supply (supply of educational service) of services then we can say both the supply are Taxable Supply. And if it is mandatory for the students to purchase those study materials from the institute then we can say the supply of goods and the supply of services are naturally bundled and supplied in conjunction with each other in the ordinary course of business. Here we can clearly say that the above two supplies are treated as composite supply according to section 2(30) of CGST Act, Read with Section 8(a) of CGST ACT. And its Principal supply is supply of Services so the entire bundle of supply is converted as supply of services so the entire supply become exempted.

Place of supply for educational services:
Most of the cases place of supply is the place where the educational event or programs are practically organized and for details regarding place of supply for educational institution we have to read section 12(6) of IGST act and section 12(7) of IGST Act (When supplier and recipient both from India.)

It is a very small presentation. Please read all sections/rules very carefully and take the proper decisions according to GST law and according to full case study. The above write up is just my personal view so in time of taking decisions, watch every practical case studies very closely and take the right judgment according to the GST Law.

Any one can contact with me in my id: [email protected] regarding taxation discussions.

Writen by:-

Mrinal (Mridul)
Sr. Accounts and Taxation Manager
S.K. Sinha Ray & Co.
Advocate and Tax Consultant.
[email protected]