The term “Education” has not been defined in the Finance Act, 1994. However, this sector covers Primary and secondary education in India. Primary education refer to education as provided up to the age of fourteen years, referred to as elementary education. Secondary and Higher Secondary education cover education from primary upto K-12. Education in this segment is provided both by private and government players and also international schools. Sarv Shiksha Program is an accolade program of government in this segment.At present, the following schemes targeted at secondary stage (i.e. class IX to XII) are being implemented in the form of Centrally Sponsored Schemes:
Rashtriya Madhyamik Shiksha Abhiyan (RMSA)
Model Schools Scheme
Girls Hostel Scheme
ICT @ Schools
Inclusive Education for Disabled at Secondary Stage
Scheme of Vocational Education
National Means-cum Merit Scholarship Scheme
National Incentive to Girls
Appointment of Language Teachers
In addition to the above the Central Sector schemes of Kendriya Vidyalaya Sangathan (KVS), Navodaya Vidyalaya Sangathan (NVS), Central Tibetan Schools Administration (CTSA), Indo-Mangolian Schools are being implemented. Education provision under all such schemes would also get covered under the preview of secondary education.
Provisions relating to Negative List
The clauses (a) to (q) of section 66D specify certain services as non-taxable services.
Clause (l) of section 66D which provides for education related services has been withdrawn w.e.f 14-05-2016. Prior to its omission, the relevant portion of the said clause reads as follows:
“(l) services by way of-
(i) pre-school education and education up to higher secondary school or equivalent;
Thus, education upto higher secondary (covering all primary, secondary and higher secondary) falls within the ambit of Negative list and is not taxable in India. It is pertinent to note that there is no requirement of recognition of law in India for the education services under this segment to be non taxable. Even foreign schools providing primary, secondary, and higher secondary education are non taxable in India.
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. 9 of the Notification No. 25/2012-ST, dated 20-6-2012 provides that any services provided by an educational institution to its students, faculty and staff are exempted from service tax. Further, following services received by an educational institution are also exemptwd from the purview of service tax regime:
(i) transportation of students, faculty and staff of the eligible educational institution;
(ii) catering service including any mid-day meals scheme sponsored by the Government;
(iii) security or cleaning or house-keeping services in such educational institution
(iv) services relating to admission to such institution or conduct of examination.
Further, for the purposes of this exemption, “educational institution” is being defined in clause (oa) of the exemption notification 25/2012-ST w.e.f. 14-05-2016 as under:
“educational institution” means an institution providing services by way of:
pre-school education and education up to higher secondary school or equivalent;
education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;
education as a part of an approved vocational education course;
Further, the exemption to services provided by way of renting of immovable property to educational institutions also has been withdrawn and thus, all Company Trust model providing infrastructure to educational institutions without any indirect tax shall now have a tax cost.
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.
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.
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 recipient of services is provided 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 pre schools.
FAQs from Education Guide issued from Department relating to Secondary 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:
Services provided by boarding schools.
Boarding schools provide service of education coupled with other services like providing dwelling units for residence and food. This may be a case of bundled services if the charges for education and lodging and boarding are inseparable. Their taxability will be determined in terms of the principles laid down in section 66F of the Act. Such services in the case of boarding schools are bundled in the ordinary course of business. Therefore the bundle of services will be treated as consisting entirely of such service which determines the dominant nature of such a bundle. In this case since dominant nature is determined by the service of education other dominant service of providing residential dwelling is also covered in a separate entry of the negative list, the entire bundle would be treated as a negative list service.
Are services provided to educational institutions also covered in this entry?
No. Such services are not covered under the negative list entry. However certain services provided to educational institutions are separately exempted under the mega–notification. These are services provided to or by an educational institution in respect of education exempted from service tax, by way of,-
(a) auxiliary educational services; or
(b) renting of immovable property
Are the auxiliary educational services for all educational institutions exempt?
No. Exemption is available for services to or by educational institutions in respect of education exempted from service tax. Therefore, service tax is chargeable on such auxiliary educational services which are in respect of education chargeable to service tax.
Are services provided by international schools giving certifications like IB also covered in this entry?
Yes. Services by way of education up to higher secondary school or equivalent are covered in this entry.
Are private tuitions covered in the entry relating to education?
No. However, private tutors can avail the benefit of threshold exemption.