Unravelling the Complexities of GST Regulations for Educational Services in India

In the ever-evolving landscape of taxation, the Goods and Services Tax (GST) law in India serves as a critical instrument in striking a balance between exempting core educational services and subjecting other services within the education sector to taxation. The lines between essential educational services and their ancillary counterparts are increasingly blurring, metamorphosing education into a well-organized industry with substantial revenues. This article aims to provide a comprehensive guide for Educational institutions and individuals seeking clarity within this intricate web of GST regulations.

Exemption provided for educational and related services [Entry No.66 of NN 12/2017 CT (R)]

"Services provided—

(a) by an Educational institution to its students, faculty and staff;

(aa) by an Educational institution by way of conduct of entrance examination against consideration in the form of entrance fee; [inserted by NN 02/2018 CT(R) dated 25/01/2018]

(b) to an Educational institution, by way of,—

(i) transportation of students, faculty and staff;

(ii) catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory;

(iii) security or cleaning or house-keeping services performed in such Educational institution;

(iv) services relating to admission to, or conduct of examination by, such institution; [upto higher secondary]

(v) supply of online educational journals or periodicals:

Provided that nothing contained in sub-items (i), (ii) and (iii) of item (b) 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.

Provided further that nothing contained in sub-item (v) of item (b) shall apply to an institution providing services by way of,—

(i) preschool education and education up to higher secondary school or equivalent; or

(ii) education as a part of an Approved vocational education course."

Analysis of this Exemption

For understanding this entry, we will have to first understand meaning of Educational institution.

Meaning of Educational institution

Under the applicable legal framework, an "Educational institution" is defined as an institution providing services in the following ways:

(i) Pre-school education and education up to the higher secondary school level or its equivalent.

(ii) Education that forms a part of a curriculum for obtaining a qualification recognized by any law currently in effect.

(iii) Education as a part of an approved vocational education course.

An approved vocational education course means :

• a course run by an ITI/ ITC9 affiliated to the National Council for Vocational Training (NCVT) or State Council for Vocational Training (SCVT) offering courses in designated trades notified under the Apprentices Act, 1961 or

• a Modular Employable Skill Course, approved by the NCVT, run by a person registered with the Directorate General of Training, Ministry of Skill Development and Entrepreneurship. The Modular Employable Skills is the minimum skill set which is sufficient for gainful employment or self-employment in the world of work. It provides employable skills to early school drop-outs, existing workers seeking skill upgradation, workers seeking certification of their skills acquired informally, etc. to improve their employability and provides certification after completion of the course.

• Private ITIs qualify as an educational institution if the education provided by these ITls is approved as vocational educational course as defined above.

It`s imperative to note that only those institutions whose operations align with the specifics outlined in the definition of "Educational institution" are entitled to avail of exemptions granted by the relevant laws.

It is to be noted that in sub clause (ii) the term "Education that forms a part of a curriculum for obtaining a qualification recognized by any law" means education delivered as part of curriculum that has been prescribed for obtaining a qualification prescribed by law, therefore following points can be inferred that:

• Conduct of degree courses by colleges, universities or institutions lead to grant of qualifications recognized by law. Therefore, eligible for exemption under this entry.

• Training given by private coaching institutes does not lead to grant of a recognized qualification. Therefore, not eligible for exemption under this entry.

For removal of doubts, it is clarified that the Central and State boards shall be treated as Educational institution for the limited purpose of providing services by way of conduct of examination to the students. [Inserted via NN 14/2018 CT(R) w.e.f. 27.07.2018]

Clarification Regarding GST on supply of various services by Central and State Board. [Circular No.151/07/2021-GST Dated 17/06/2021

(i) GST is exempt on services provided by Central or State Boards (including the boards such as NBE) by way of conduct of examination for the students, including conduct of entrance examination for admission to Educational institution [under S. No. 66 (aa) of notif No. 12/2017-CT(R)]. Therefore, GST shall not apply to any fee or any amount charged by such Boards for conduct of such examinations including entrance examinations.

(ii) GST is also exempt on input services relating to admission to, or conduct of examination, such as online testing service, result publication, printing of notification for such examination, admit card, question paper etc when provided to such Board under entry 66 (b) (iv) of NN 12/2017.

Some special points to be noted:

1. Boarding schools provide service of education bundled with other services like providing dwelling units for residence and food. These are services provided by Educational institutions to its student faculty and staff, and therefore all these services are exempt from GST. Also, services of providing residential dwelling for use as residence to any person others and Registered person is also covered under entry Number 12 of this exemption list.

2. GST is liable for services provided by Educational Institutes such as ICAI, IITs, etc., charging fees from prospective employers who come to the institute to recruit candidates through campus interviews as these services are not covered under this entry

3. If any course provided by an Educational institution leads to a dual qualification in which only one is recognized by law, then it would be the case of bundled services which is a Mixed supply and GST will be levied after considering the provision of Section 8(b) of CGST Act.

4. It is to be kept in mind that sub item (i), (ii) & (iii) of item (b) of this entry [i.e., transportation, catering, security, cleaning and housekeeping services] is applicable only to Educational institutions providing pre-school education and education up to the higher secondary school level or its equivalent.

Similarly, sub item (v) of item (b) of this entry [i.e., supply of online educational journals or periodicals] is applicable only to Educational institutions providing education that forms a part of a curriculum for obtaining a qualification recognized by any law currently in effect.

However, sub item (iv) of item (b) of this entry [i.e., services relating to admission to, or conduct of examination by, such institution] is applicable to all Educational institutions.

• Services by giving on hire Motor vehicle for transport of students, faculty and, staff to a person providing services of transportation of student, faculty and, staff to an Educational institution providing services by way of preschool education and education up to higher secondary school or equivalent is exempt. [Entry no. 22(c) of NN 12/2017 CT(R), inserted by NN 02/2018-CT(R), dated 25.01.2018].

Various clarifications for this entry are explained as under:

1. Clarification regarding GST on college hostel mess fees [Circular No. 28/02/2018-GST, dated 08.01.2018]

Educational institutions have mess facilities for providing food to their students and staff. Such a facility is either run by the institution/ students themselves or is outsourced to a third person. Supply of food or drink provided by a mess or canteen is taxable.

Therefore, if catering services is one of the services provided by an Educational institution to its student faculty and staff then the same is exempt however if the catering services are provided by anyone other than the Educational institution then it is supplier services to the concerned Educational institution and attracts GST.

2. Clarification with respect to the applicability of GST on the supply of goods in Anganwadi and school under the mid-day meals scheme if such supplies are funded by government grants and or corporate donations [Circular No. 149/05/2021 – GST dated 17.06.2021]

Any catering service provided to an Educational institution is exempt from GST, including mid-day meal services. The scope of this entry is broad and covers any food service to schools, including pre-schools. It`s also mentioned that Anganwadi, which provides preschool non-formal education, is considered an educational institution.

As per the recommendation of the GST Council, services provided to educational institutions in the form of serving food, including mid-day meals, are exempt from GST, regardless of whether they are funded by government grants or corporate donations. This exemption also applies to Anganwadi, whether sponsored by the government or funded through corporate donations.

3. Applicability of GST on various programs conducted by the Indian Institutes of Managements (IIMs)

At present, Indian Institutes of Managements are providing various long-duration programs (one year or more) for which they award diploma/ degree certificates duly recommended by the Board of Governors as per the power vested in them under the IIM Act, 2017. Therefore, it is clarified that services provided by the Indian Institute of Management to their students in all such long-duration programs (one year or more) are exempt from the levy of GST.

For the period from 1st July 2017 to 30th January 2018, IIMs were not covered by the definition of Educational institutions as given in notification no. 12/2017 CT(R). Thus, they were not entitled to exemption under Sl. No. 66 of the said notification. However, there was a specific exemption to the following three programs of IIMs under Sl. No. 67 of notification No. 12/2017-Central Tax (Rate):

two-year full-time Post Graduate Programmes in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of the Common Admission Test (CAT) conducted by the Indian Institute of Management,

fellow programme in Management,

five years integrated programme in Management.

Therefore, for the period from 1st July 2017 to 30th January 2018, GST exemption would be available only to three long duration programs specified above.

It is further, clarified that with effect from 31st January 2018, all IIMs have become eligible for exemption benefits under Sl. No. 66 of notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. As such, specific exemption granted to IIMs vide Sl. No. 67 has become redundant. The same has been deleted vide notification No. 28/2018-Central Tax (Rate) dated, 31st December, 2018 w.e.f. 1st January 2019

Since 31st January 2018, IIMs have become eligible for exemption under entry no. 66, therefore exemption granted under entry 67 (as mentioned above) has been deleted vide NN 28/2018 CT(R) dated 31st December 2018. For the period 31st January 2018 to 31st December 2018, two exemptions i.e., under entry 66 and 67 prevailed.

The legal position in such a situation has been clarified by the Hon’ble Supreme Court in many cases that if there are two or more exemption notifications available to an assessee, the assessee can claim the one that is more beneficial to him. In this regard following case laws may be referred-

• H.C.L. Limited vs Collector of Customs [2001 (130) ELT 405 (SC)]

• Collector of Central Excise, Baroda vs Indian Petro Chemicals [1997 (92) ELT 13 (SC)]

• Share Medical Care vs Union of India reported at 2007 (209) ELT 321(SC)

Indian Institutes of Managements also provide various short-duration/short-term programs for which they award participation certificates to the executives/ professionals as they are considered "participants" of the said programs. These participation certificates are not any qualification recognized by law. Such participants are also not considered students of the Indian Institutes of Management. Services provided by IIMs as an Educational institution to such participants are not exempt from GST. Such short-duration executive programs attract a standard rate of GST @ 18% (CGST 9% + SGST 9%).