GST ITC can be availed on amount spent from Government grant: AAR

The present application has been filed under the CGST Act by a company named M/s Kerala Academy for Skills Excellence (Applicant) before the kerala Authority for Advance Ruling Goods and Services Tax Department, Tax Tower, Thiruvananthapuram.

The Kerala Authority for Advance Ruling (AAR) (AR No. KER/28/2025 ) has held that the Kerala Academy for Skills Excellence (KASE), the State Skill Development Mission, must pay GST on the share of fees received from its skill training partners as well as fees collected from students in its own institutes.

M/s Kerala Academy for Skills Excellence is a company owned by the Government of Kerala under the administrative department of Labour and skills and is managed by a board of directors comprising secretaries of various departments and industrial experts. It provides several skill development initiatives, such as Centres of Excellence (CoEs) Accreditation of Skill Training Courses and skill development programmes for other departments. It was established under section 15 of the companies Act 1956 and is registered under section 12A.

Questions Asked by the Applicant:

The applicant asks the following questions, seeking the present Kerala Authority for Advance Ruling.

“Q 1. In view of the Notification No. 12/2017- Central Tax (Rate), dated 28.06.2017, the applicant would like to get clarified whether the share of fee received from their skill training partners and fee collection from their own skill training institutes fall under taxable service or not?

Q 2. If GST is applicable for the income as per the provisions of the Act, can they avail Input Tax credit on the amount spent from the grant received from Government in relation to the generation of such income?”

AAR’s Decision on Classification

The Kerala Authority for Advance Ruling Goods and Services Tax gave the following answers to the questions asked by the applicant:

Answer 1 (a): The authority decided that fees that KASE receives from its skill training partners are not exempt from GST. The government’s tax rules do not allow any GST exemption for this type of income under Notification 12/2017. So, KASE must pay GST on the share of fees it gets from its training partners.

(b) Authority added, Since KASE did not provide documents proving that its own training courses fall under any GST-exempt skill programme, the exemption cannot be granted. Therefore, the fees KASE collects directly from students in its own training institutes must be taxed under GST.

Answer 2: The authority said since the applicant has not provided details about the goods or services purchased and how they are used, a final ruling on cannot be given. However, it is clarified that using government grant funds does not automatically prevent claiming ITC, as long as the inputs are used for taxable supplies and all conditions under Section 16 of the CGST Act are met.