Commercial Coaching – Taxability and Exemptions from Service Tax
‘Commercial Training or Coaching’ services were brought into the Service Tax net w.e.f. 1st July 2003. Notification No. 9/2003-ST effective from 01/1/2003 exempted the taxable services provided in relation to commercial training or coaching, by a vocational training institute, a computer training institute or a recreational training institute. The said exemption benefit was extended time to time. Thereafter, Notification No. 24/2004-ST dated 10/9/2004 exempted the taxable services in relation to commercial training or coaching, by "a vocational training institute", or "a recreational training institute" only
The term Vocational Training Institute has been defined in the Notification Nos. 9/2003 and 24/2004 and the Circulars issued thereon. It has not been defined any where else in the Act. As such, what the statute intends to cover in the ambit of the term ‘Vocation’ can be better understood from these Notifications and Circulars only.
As per Notification No 24/2004:
“Vocational training institute” means a commercial training or coaching centre which provides vocational training or coaching that impart skill to enable the trainee to seek employment or undertake self-employment, directly after such training or coaching.
It is evident from the above definition that an institute is eligible for exemption from service tax if it falls within the ambit of the above definition. As such, an institute will be eligible for exemption in case:
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It is providing vocational training or coaching by imparting skill to the trainee; and
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Such trainee is enabled to seek employment or undertake self-employment directly after such training or coaching; and
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It is a commercial training or coaching centre.
Also, as defined in Section 65 contained in Chapter V of Finance Act, 1994,
The term-
“ commercial training or coaching” means any training or coaching provided by a commercial training or coaching centre;
And,
“commercial training or coaching centre” means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than the sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include pre-school coaching and training centre or any institute or establishment which issues any certificate or diploma or any educational qualification by law for the time being in force.
The term ‘Vocational’ has been used extensively for Tax purposes in the various notifications and circulars issued by the Government of India. In the absence of a specific definition, the meaning of the term can be derived and fetched from Encyclopedia and various pronouncements in the form of case laws, notifications and circulars.
The New World Encyclopedia defines Vocational Education, or Vocational Education and Training, also called Career and Technical Education in the following words:
“Vocational Education or Vocational Education and Training, also called Career and Technical Education prepares learners for careers in manual or practical activities, traditionally non-academic and only related to a specific trade, occupation or vocation”.
Ever since the introduction of service tax, cases have been settled by various tribunals wherein the concept of vocation has been discussed and cases decided thereby.
Some of the Case Laws wherein the above issue was involved are discussed herein below:
In Doon Institute of Information Technology Pvt. Ltd. Versus Commissioner of Central Excise,
THE issue is whether the computer training institute providing vocational training would be entitled to benefit of exemption under Notification No. 24/2004-ST dated 10th September 2004 as amended for the period from 10/09/2004 to 15/06/2005.
The appellant submitted that the computer training provided by it enabled “the trainee to seek employment or undertake self-employment directly after such training, which qualified it to be a “vocational training institute”.
The Tribunal observed, "commercial training or coaching" services were brought into the service tax net w.e.f. 1st July 2003. Notification No. 9/2003-ST effective from 01/1/2003 exempted the taxable services provided in relation to commercial training or coaching, by a vocational training institute, a computer training institute or a recreational training institute. The said exemption benefit was extended time to time. Thereafter, Notification No. 24/2004-ST dated 10/9/2004 exempted the taxable services in relation to commercial training or coaching, by "a vocational training institute", or "a recreational training institute" only, while computer training institutes were brought under tax net.
It is contended by Revenue that the appellant is running a computer training institute and not a vocational training institute. It is further contended that "Notification No. 24/2004-ST had not extended exemption benefit to a computer training institute, which was specifically included in earlier Notification No. 9/2003 - ST.
The Tribunal held that “computer training institute is providing vocational training, it would become vocational training institute and covered under Explanation (1) of Notification No. 24/2004-ST. It is well settled that exemption notification is not only to be construed strictly but also reasonably having regard to the language employed therein. The notification shall be read as a whole, not in part.” The Tribunal also noted the amendment of Notification No. 24/2004-ST by Notification No. 19/2005-ST dated 7th June 2005, whereby it was added
.
In
The assessee was refused benefit of Notification No. 09/2003 (since replaced by Notification no 24/2004) on the ground that it was not registered with AICTE. On appeal, Tribunal observed that Notification no 09/2003 does not envisage registration of a “Vocation Training Institute”. As long as the trainees achieve skills to seek employment or undertake self-employment, then the appellant is eligible for benefit for Notification No 09/2003. The appeal was allowed in favor of the appellant.
In Centre For Development of Advance Computing Versus Commissioner of Central Excise (Appeals-II),
In this case the appellant was a society registered under Societies Registration Act, 1860 and was exempt from Income Tax u/s 35(i)(ii) and also u/s 12(A)(a) of the Income Tax Act, 1961. Irrespective of this, Revenue initiated proceedings for non-payment of Service Tax. On appeal, the Tribunal observed that:
In any case, it was submitted that Notification No 24/2004-S.T., dated 10.09.2004 exempted taxable service provided by vocational training institute or recreational institute in relation to commercial training or coaching. Even if it is presumed that the appellant is engaged in providing commercial training or coaching, it is nothing but vocational training as it helps the trainee directly either to seek employment or to start self employment. The appeal was allowed in favor of the appellant, even though it was excluded from the exemption notification in the capacity of a computer coaching institute.
Thus, it can be seen that even if any commercial training and coaching centre may not be registered as a society or a charitable trust or a not-for-profit organization, the main criterion to avail benefit of Notification No 24/2004 is only that “The trainee should be able to undertake self-employment or seek employment directly after such coaching or training”.
Apart from the above three rulings favoring the appellants because they correctly satisfied the Explanation[1] of the said notification, the Appellate Tribunal in Banglore has favored an appellant by stating that “the definition of vocational training should not be interpreted in a very narrow sense”. The Tribunal has gone a step ahead and granted benefit of Notification No 9/2003-ST to the appellant even when the trainees are required to appear for an examination conducted by IRDA after completion of training by the appellant institute. Only upon successfully writing this examination, the trainee is able to seek employment / self-employment. The said view has been taken in the case briefly discussed herein below:
In Pasha Educational Training Institute Vs C.C. & C.E., Service Tax Cell, Hyderabad-II [2008] (10) S.T.R 434 (AP)
The appellants were providing training to Insurance Agents sponsored by various insurance companies and collecting fees for the same. However, they did not pay the service tax on the fees and the revenue proceeded against the appellants by way of issue of show cause notice in 2006 demanding service tax. The appellants were aggrieved over the order of the lower authority. After long proceedings and aggrieved over the order of the Commissioner (Appeals), the matter came before the Tribunal and the judgment was delivered on February 17, 2009.
The tribunal ruled that the appellant was providing very comprehensive training for insurance agents.
The extracts of judgment are:
On going through the nature of the training, it is clear that the said training can be considered as "Commercial Training or Coaching" because the Institute imparts skill or knowledge on the subject of insurance. However, the second point to. be noted is whether, the said training can be considered as a vocational training. “Vocational" training means training that imparts skills to enable the' trainee to seek employment or undertake self employment directly after such training or coaching. This definition should not be interpreted in a very narrow sense as done by the Commissioner (Appeals). The argument of the Commissioner (Appeals) is that even after the training, the trainees should again write examination conducted by IRDA to qualify to work -as Insurance/Agent under the Insurance Act, 1938. We should not forget that -'.the comprehensive training given by the appellant enables the trainees to appear for the examination conducted by IRDA. Moreover, the appellant institute is also recognized for imparting training by the IRDA. In these circumstances, we cannot say that the training imparted is not a vocational training. We are of the view that the training imparted should be considered to be a vocational training. Once, it is held that the appellant imparts vocational training, then they would be entitled for the benefit of exemption notification 9/2003 ST as amended.
The tribunal allowed the appeal on the ground that even though the appellant’s training is not sufficient to directly enable the trainee to seek employment / self-employment, yet it enables him to appear for the IRDA examination after which he can seek such employment.
Recently, an Advance Ruling on service tax regarding vocational training institute was issued in the case of CAE Flight Training (India) Private Limited vide Ruling No AAR/ST/01/2010 wherein it has again been highlighted that ‘only that training can be considered vocational where trainee can seek employment directly after the training.
An organization which fulfills all the three conditions of being a vocational course may be eligible for benefit of Notification No 24/2004.
AMENDMENTS CARRIED OUT BY FINANCE BILL, 2010
Even the law itself felt the need to amend the act and clarify the meaning of term ‘Vocational Courses’ and carried out amendment by introducing the proposal in the Finance Bill 2010 presented by the Honorable Finance Minister in the Parliament on 27th February, 2010.
There is an amendment in the definition of “Vocational Training Centre” which clarifies the issue of Vocational Training.
Earlier Definition of “Vocational Training Centre” reproduced as (Notification No. 24/2004)
“vocational training institute” means a commercial training or coaching centre which provides vocational training or coaching that impart skills to enable the trainee to seek employment or undertake self-employment, directly after such training or coaching;
Now the definition is amended by Notification No 03/2010 as:
“ vocational training institute” means an Industrial Training Institute or an Industrial Training Centre affiliated to the National Council for Vocational Training, offering courses in designated trades as notified under the Apprentices Act, 1961(52 of 1961).
Before the issue of notification no. 03/2010, the position was all the institutes who were providing vocational training or coaching were not subjected to tax for their vocational coaching. But after the said amendments, only those institutes who are/will be affiliated to the National council for vocational training & offering courses in designated trades are exempt from tax liability.
It is well settled law that Taxes and Penalties can not be levied retrospectively. In view of the discussion and the amendments which are prospective, in cases pertaining to the earlier periods, the benefit of the notifications giving exemptions from Service Tax should be extended to the institutes conducting courses which are classifiable as vocational under the earlier law before pronouncement of amendments.
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