Exemption not available to sub-contractor on services provided to educational institutions on behalf of main contractor

The AAAR, Telangana in the matter of M/s Magnetic Infotech Private Limited [Order-in-Appeal No. AAAR/13/2022 dated November 22, 2022] has ruled that the sub-contractor is not entitled to claim Goods and Services Tax ("GST") exemption on services provided to Educational Institutions on behalf of the main contractor under Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017 ("the Services Exemption Notification").

Facts

M/s Magnetic InfoTech Private Limited ("the Applicant") is engaged in providing pre and post examination services to the Educational Boards, Universities and Open Universities ("the Educational Institutions"). The Applicant provided services with respect to data processing for conduct of examination, results preparation and generation and printing of statistical data and reports in the prescribed proformas as required by the Educational Institutions.

The Applicant sought advance ruling before the AAR, Telangana w.r.t. applicability GST exemption on the pre and post Examination services provided by the Appellant to Educational Institutions and whether the exemption is available to the Applicant in case of the services are provided on sub-contract basis.

The AAR, Telangana ruled that the GST exemption is applicable on the pre and post Examination Services provided by the Applicant under Sl. No. 66 of the Services Exemption Notification. Although, regarding the second issue, the AAR, Telangana expressed divergent opinions.

Hence, the issue has been raised in this appeal.

Issue

Whether the exemption is available in case the services are provided on sub-contract basis i.e., the Applicant provides pre and post examination services to the main contractor who in turn provides the services to the Educational Institutions?

Held

The AAAR, Telangana in Order-in-Appeal No. AAAR/13/2022 held as under:

• Noted that,the exemption would be available when the services are provided "to" an Educational Institution for services relating to admission to, or conduct of examination by, such institution.
• Opined that, the main contractor to whom the Applicant is to provide services as sub-contractor is not an Educational Institution, though the services are allegedly being provided to the Educational Institution by the main contractor, the exemption contained in the Services Exemption Notification is not available to the Applicant.
• Observed that, when exemption contained in a notification is to be claimed, the Applicant is to satisfy the conditions prescribed therein. The wordings of any notification have to be strictly read to allow or deny any exemption.
• Held that, the Applicant as a sub-contractor, is not eligible to claim exemption under the Services Exemption Notification.

Relevant Provisions

Sl. No. 66 of the Services Exemption Notification: