Although its a long text, but so are those ever-lasting Confusions!!!
Confusions on the Taxability of Auxiliary Educational Services provided by an Educational Institiution in some particular cases where otherwise the specific service-based exemptions are available :
Presently, I have come across a case of the University at Jaipur providing educational qualifications recognised by law which is being run by the Society registered under Sec. 12 AA of the Income-tax Act. Accordingly, the University is providing education meant to be covered under negative list by virtue of Sec. 66D (I).
Apart from the services provided by way of exempted education in respect of recognised courses, the University do provide other auxiliary services to its students in the nature of Hostel Accommodation, Mess Facilities and Bus Transportation. These services are in the nature of ancillary services to the main education services provided by the institution.
Legal Position under Service Tax Laws before and after 01.04.2013:
Prior to 01.04.2013, all such auxiliary educational services provided to or by an educational institution were exempt from service tax as per Entry No. 9 of Notification No. 25/2012-ST dated 20/06/2012
But w.e.f 01/04/2013, there is a change in Entry No. 9 of the Notification No. 25/2012-ST, dated 20.6.2012 vide Notification No. 3/ 2013-ST. For the words “provided to or by”, the words “provided to”shall be substituted. So, going by the plain reading, the services provided by educational institutions by way of auxiliary educational services or renting of immovable property are not exempted w.e.f 01/04/2013.
I am discussing herewith the detailed facts relating to the specific auxiliary services provided by the University along with the relevant issues & conflicts over the taxability:
A) Hostel Accommodation Fees charged from the students :
i) Facts relevant to the present case of the University: Many students come across from the different parts of Rajasthan and other states to get the relevant qualifications offered by the University at Jaipur. Thus, the University has separately built areas for Girls and Boys Hostel in its campus. The facility of Hostel accommodation is optional and it depends upon the students to opt for such accommodation. The University charges a certain amount of Hostel Fees for the same.
ii)Taxability issues:-
a) If considered as Auxiliary Services: The services of accommodation provided to students by educational institution will be liable for payment of service tax, if we interpret them as auxiliary educational services.
b) Confusion as to applicability of Entry no. 18 of Notification No.25/2012 on Hostel accommodation:
By virtue of Entry No. 18 of this Notification,
“Services by way of renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a unit of accommodation below rupees one thousand per day or equivalent”
Question Involved: Whether we can cover the Hostel fees charged by the institution in this category to avail the benefit given by this notification?
c) Applicability of Negative List provisions as per Sec. 66 D (m) :
As per Sec. 66 D (m), Services by way of renting of residential dwellings for use as residence are non-taxable services.
Rooms in university in which students live are a kind of dwelling houses and in such context, Hostel charges collected shall also be not leviable to service tax.
Confusion as to service-tax applicability : Going by the intentions of the Negative List & exemption notification, can we consider the Hostel Accommodation Fees received as exempt from payment of service tax?
B) Mess Fees charged from the Hostel students :
i) Facts relevant to the present case of the University: The University has designated particular area with sitting arrangements as a Mess in Hostel premises where the food (breakfast, lunch, dinner, etc.) is being served to the students residing in the Hostels. The Food Catering arrangements have been outsourced to an outside Catering service provider who is being paid a fixed amount per student per month. The University in turn also recovers the same as Mess Fess from Hostel students as fixed charges per student per month. As such, the University recovers only the cost of Catering arrangements incurred by it and no profit element is earned in such mess receipts.
ii) Questions on Taxability of Mess Receipts:
a) Whether Mess receipts recovered from the Hostel students will be taxable as auxiliary educational services?
b) Will it be taxable even if there is no profit element involved in such receipts and it is merely the recovery of cost incurred by way of Catering arrangements outsourced to outside service providers?
c) Mess Receipts are predominantly in relation to of sale of Food Stuffs, etc. meant to be in nature of goods. Will it affect the taxability of such services?
iii) Confusion over effect of Exemption as per Entry No. 19 of Notification No. 25 which states as under:
“Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year”
Question Involved: Whether such mess receipts can be exempt in the context of this exemption notification?
C) Bus Transporation Fees charged from the students, faculty and staff :
i) Facts relevant to the present case of the University: The University is also providing the optional transportation facilities to its students, faculty and staff. The bus transportation arrangements are outsourced from an outside bus contractor to whom fixed amount is paid on per student per month basis as per agreement. The University recovers the same as Bus Transportation fees from the students and faculty or staff.
ii) Taxabilty : The definition of auxiliary educational services also include transportation of students , faculty or staff of such institution. So, such services will be liable to service-tax if considered as auxiliary educational services.
iii) Confusions over applicability of Entry No. 23 of Exemption notification:
This entry provides exemption to transport of passengers with or without accompanied belongings by a contract carriage for transportation of passengers excluding tourism, conducted tour, charter or hire.
“As per Motor Vehicles Act, 1988, A Contract carriage is one which is engaged for hire or reward by a person for carriage of passengers mentioned or agrees at the time contract. The consideration can be fixed or agreed rate of sum on time basis or distance basis. In either case, there should not be any stopping for pick up or set down of passengers not included in the contract”
In case of transportation facilities provided by the University, the bus gets stopped only to pick or set down students included in the contract and no other passengers are being allowed to be transported. The contract is entered into for to and fro transportation of students.
Question Involved is that whether this exemption notification can be specifically applied to such services and whether the bus transport facilities are exempted or not??
CAclubindia
