The term “Education” has not been defined in the Finance Act, 1994, nor has ‘Coaching Centre’. Coaching Centers are ancillaries to the education system. All centres providing learning for courses which are provided by educational institutions or programs run by them but are not recognized by law shall get covered under this category.
Such codes are no longer statutory but used for statistical purpose for the purpose of registration and for payment of tax as specified vide Circular No.165/16/2012 –ST dated 20.11.2012:
Tax Collection of Service
Interest and penalties on such service
Provisions relating to Negative List
Services of Coaching centers are not covered under Negative List.
Provisions relating to exemptions
Small Service Provider
Vide Notification No 33/2012-ST, dated 20.06.2012 – Exemption to Small service providers having taxable turnover of less than 10 Lakhs and providing services other than by way of under a brand name.
Import of Technology
Vide Notification No. 14/ 2012-ST, dated March 17, 2012 – Exemption in respect of Taxable service involving import of technology, from so much of service tax, as is equivalent to the extent of amount of R&D Cess payable on the said transfer of technology under the provisions of section 3 of the Research and Development Cess Act, 1986.
To Foreign Diplomatic missions and their personnel
Vide Notification No 27/2012-ST, dated 20.06.2012 – Exemption for all the taxable services provided by any person, for the official use of a foreign diplomatic mission or consular post in India, or for personal use or for the use of the family members of diplomatic agents or career consular officers posted therein.
Services by TBI or STEP
Vide Notification No 32/2012-ST, dated 20.06.2012 – All taxable services provided by TBI or STEP have been exempted
Services provided to SEZ
Vide Notification No 40/2012-ST, dated 20.06.2012, all taxable services received by a Unit located in a Special Economic Zone (SEZ) or Developer of SEZ for the authorized operations, has been exempted from the levy of whole of the service tax.
Item No. 8 of the Notification provides that:
“8. Services by way of training or coaching in recreational activities relating to arts, culture or sports;”
Provisions relating to Valuation and Abatement
Section 67 read along with Service Tax (Determination of Value) Rules, 2006 provides the manner of determining the value of taxable services on which service tax should be levied.
In respect of Education services, no specific provision for determination of taxable value has been provided. However it has been clarified that the value of taxable services is the total amount of consideration consisting of all components of the taxable service and it is immaterial that the details of individual components of the total consideration are indicated separately in the invoice. Thus, the value of taxable Education services is to be determined in terms of provision of Section 67 read with the prescribed rules.
Sale of books
It is further clarified that if the books are sold separately by Coaching Centre, such value shall not be considered as part of services as the same should tent amount to sale of books.
No abatement has been granted in case of Education Service in Notification No. 26/2012-ST dated 20-6-2012.
Provisions relating to Cenvat Credit
The Credit is available to the service provider or the manufacture of the duty or tax paid on ‘capital goods’, ‘inputs’ and ‘input services’. The Cenvat Credit is not available when used for providing exempted output service. Thus, to the extent output services are exempt from the payment of service tax, the credit of duties and taxes paid on inputs/input services used therein will not be available.
Hence, if the services are covered by Negaive List / Notification No. 25/2012-ST dated 20-6-2012, then, no Cenvat Credit will be available for such exempted services.
Provisions relating to point of taxation
If the service provider is providing only those services which are specified in the Negative List, then, the determination of point of taxation is not of much importance. But, in other cases, the point of taxation will be determined as per Rule 3 of Point of taxation Rules, 2011.
As per rule 3, the point of taxation shall be:
Time when the invoice for the service provided or to be provided is issued. As per Rule 4A of Service Tax Rules, invoice shall be issued within 30 days from the date of completion of service. In case invoice is not issued within 30 days from the completion of service, the point of taxation shall be the date of completion of service.
In case where the person providing the service receives payment before the time specified above, the date of receipt of payment shall be the point of taxation.
In case of Educational services, fees are received in advance even before the actual service is rendered. Hence, as per Rule 3(b), the service tax will be payable on receipt of such an advance even if the services are rendered later.
Provisions relating to Place of Provision of Service Rules, 2012
The Place of Provision of Service Rules, 2012 contains different rules for different nature of services. In present context, Rule 4(b) of Place of Provision Rules, 2012 requiring presence of individual for rending of service is important and thus, the place of provision of service would be the place where the services are rendered as provided under rule 4(b) of Place of Provision of service rules, 2012. Thus, place where education is provided to student shall be place of provision of services.
Provisions relating to reverse charge
No exemption for payment of Service Tax as a receipient of services is provided to Coaching Centre and thus, all services which require payment of Service Tax under Reverse charge under Notification No. 30/2012-ST dated 20-6-2012 shall be application on Coaching Centres.
FAQs from Education Guide issued from Department relating to Education sector
The following questions have been compiled from the clarifications from the clarifications provided by the government vide Master Circular D.O.F. No 334/1/2012-TRU dated March 16, 2012 and Taxation of Services – An Education Guide dated 20.06.2012 for the convenience of the readers:
If a course in a college leads to dual qualification only one of which is recognized by law would the service provided by the college by way of such education be covered in this entry?
Provision of dual qualifications is in the nature of two separate services as the curriculum and fees for each of such qualifications are prescribed separately. Service in respect of each qualification would, therefore, be assessed separately. If an artificial bundle of service is created by clubbing two courses together, only one of which leads to a qualification recognized by law, then by application of the rule of determination of taxability of a service which is not bundled in the ordinary course of business contained in section 66F of the Act it is liable to be treated as a course which attracts the highest liability of service tax. However incidental auxiliary courses provided by way of hobby classes or extra-curricular activities in furtherance of overall well being will be an example of naturally bundled course. One relevant consideration in such cases will be the amount of extra billing being done for the unrecognized component viz-a-viz the recognized course.
Are private tuitions covered in the entry relating to education?
No. However, private tutors can avail the benefit of threshold exemption.