In this article, we will discuss the amendment applicable from 1st April 2017 on education service under service tax. We divide our discussion in 3 parts, which are as follows:-
1) Definition of Educational Institute;
2) Taxability
3) Impact of notification.
Definition:
According to clause (I) of section 66D of the Finance Act, 1994 "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 curriculum for obtaining a qualification recognized by any law for the time being in force;
(iii) Education as a part of an approved vocational education course.
Points to be considered:
1) Qualification recognized by any law for the time being in force means any Indian Law i.e. it doesn't includes qualifications recognized by any foreign law.
2) "Education" is not defined in the act but as per Apex Court decision in "Loka Shikshana Trust v/s CIT", education is process of training and developing knowledge, skill and character of students by normal schooling.
Taxability:
Prior to amendment:-
S.No.9 of Notification no. 25/2012, deal with service provided by education institutes. As per notification no. 25/2012 as amended service provided:-
a) By an educational institute to its students, faculty and staff;
b) To an educational institute, by way of-
- Transportation of students, faculty and staff;
- Catering, including any mid-day meals scheme sponsored by the government;
- Security or cleaning or housekeeping services performed in such educational institutes;
- Services relating to admission to, or conduct of examination by, such institution are exempt from service tax.
After amendment:
After recent amendment in notification no. 25/2012 by notification no. 10/2017- service tax dated 08.03.2017 a new proviso is added in the above entry which will be applicable from 01st April 2017, which states that:
"Provided that nothing contained in clause (b) of this entry 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".
Impact of the amendment:
Prior to amendment service provider who provides services of:-
- Transportation of students/ faculty/staff,
- Catering, including any mid-day meals scheme sponsored by the government,
- Security or cleaning or housekeeping services performed in such educational institutes,
- Services relating to admission to, or conduct of examination by, such institution will not charged service tax on their invoices.
But now service provider will charge service tax on their invoices issued in relation to above services, to education institutes who are providing;
- Education as a part of curriculum for obtaining a qualification recognized by any law for the time being in force;
- Education as a part of an approved vocational education course.
Also on the other side, these educational institutes are not able to take the input credit of invoices issued by service providers who are providing services falling in clause (b) of entry number 9 of notification no. 25/2012. Because service provided by the above education institutes are not liable to service tax. Hence the cost of education will increase.
Hope you understand the amendment.
The author can also be reached at advisorsacumen@gmail.com.
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