CBEC issues circular F.No137/23/2007-CX.4 dt 28/01/2009 stating that even institutes run by no profit organization or Trusts are liable to Service Tax . Only colleges approved by AICTE or deemed university and vocational courses institutes are out of service tax .The excerpt of circular is given below
COMMERCIAL NATURE OF INSTITUTE
Service tax is leviable on services provided by ‘commercial training and coaching centers’, since the year 2003. As the phrase ‘commercial training or coaching center ‘has been defined in a statute, there is no scope to add or delete words while interpreting the same. The definition commercial training or coaching center has no mention that such institute must have ‘commercial’ (i.e. profit making) intent or motive.
POST SCHOOL EDUCATION
from the year 2005 onwards, a technical institution or establishment (which is otherwise recognized being a university, or affiliate college) not having AICTE approval cannot be called to be the one issuing any certificate or diploma or degree or any educational qualification recognized by the law for the time being in force and thus be within the ambit of service tax. However ‘Deemed to be University’ have been exempt from this requirement. As per the said notification for the institutes ‘Deemed to be University’, it is not a pre-requisite to obtain the approval of AICTE to start any programme in technical or management education leading to an award, including degrees in disciplines covered under the AICTE Act, 1987. However, such institutes are required to ensure the maintenance of the minimum standards prescribed by the AICTE for various courses under the jurisdiction of the said council.
VOCATIONAL TRAINING INSTITUTE
The vocational training institutes are exempted from service tax vide notification no. 24/2004-ST, dated 10.09.2004 (as amended). By definition, such institutes should provide training or coaching that imparts skill to enable the trainee to seek employment or undertake self-employment, directly after such training or coaching. Disputes have arisen in respect of institutes that offer general course on improving communication skills, personality development, how to be effective in group discussions or personal interviews, general grooming and finishing etc. It is claimed that such training or coaching improves the job prospects of a candidate and therefore they are eligible for exemption as ‘vocational training institutes. However, a careful reading of the definition shows that the exemption is available only to such institutes that impart training to enable the trainee to seek employment or self-employment. The courses referred to above do not satisfy this condition because on their own such courses do not prepare a candidate to take up employment or self-employment directly after such training or coaching. They only improve the chances of success for a candidate who already has the required skill. Therefore, such institutes are not covered under the exemption.
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