The term “Education” has not been defined in the Finance Act, 1994. The other terms as are relevant from the perspective of the current sector have been defined in Section 65B of Finance Act 1994 are as follows:
A course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training or State Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961; or
A Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Employment and Training, Union Ministry of Labour and Employment”
Under the constitution of India, Vocational training is the concurrent subject of both Central and State Governments. The development of training schemes at National level, evolution of policy, laying of training standards, norms, conducting of examinations, certification, etc. are the responsibilities of the Central Government, whereas the implementation of the training schemes largely rests with the State Govts./UT Administrators. The Central Govt. is advised by the National Council of Vocational Training (NCVT), a tripartite body having representatives from employers, workers and Central/State Governments. Similar Councils termed as State Councils for Vocational Training are constituted for the same purpose by the respective State Governments at state levels.
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Clause (l) of section 66D which provides for education related services has been withdrawn w.e.f 14-05-2016.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-
(iii) education as a part of an approved vocational education course;”
The Counsils aim to set up ITIs to impart craftmenship program to devel skilled labour in the country. It is pertinent to note that there are many private institutes also in India which offer courses in vocational training and finishing, but most of them have not been recognized by the Government. Such colleges when recognized by government for their program would get into negative list in higher education, under this segment, only programs of NCVT and SCVT are covered.
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.
Clause 9 of Notificaiton No. 25/2012
Item No. 9 of the Notification No. 25/2012-ST, dated 20-6-2012 exempts following services received by eligible educational institutions are exempted from service tax:
(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 as institutions providing educational services specified in the negative list. However, w.e.f. 14-05-2016, clause (oa) has been substituted and new clause reads 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;
Clause 9A of Notification No. 25/2012 dated 20-06-2012 provides for exemption against any services provided by,
the National Skill Development Corporation set up by the Government of India;
a Sector Skill Council approved by the National Skill Development Corporation;
an assessment agency approved by the Sector Skill Council or the National Skill Development Corporation;
a training partner approved by the National Skill Development Corporation or the Sector Skill Council,
in relation to (a) the National Skill Development Programme implemented by the National Skill Development Corporation; or (b) a vocational skill development course under the National Skill Certification and Monetary Reward Scheme; or (c) any other Scheme implemented by the National Skill Development Corporation.
Clause 9C of Notification No. 25/2012 dated 20-06-2012 provides for exemption against services of assessing bodies empanelled centrally by Directorate General of Training, Ministry of Skill Development and Entrepreneurship by way of assessments under Skill Development Initiative (SDI) Scheme.
Clause 9C of Notification No. 25/2012 dated 20-06-2012 provides for exemption against Services provided by training providers (Project implementation agencies) under Deen Dayal Upadhyaya Grameen Kaushalya Yojana under the Ministry of Rural Development by way of offering skill or vocational training courses certified by National Council for Vocational Training.
Clause 8 of Notificaiton No. 25/2012 dated 20-06-2012 provides for exemption against services by way of training or coaching in recreational activities relating to arts, culture or sports.Thus vocational training in such programs when provided for recreational purpose shall be exempt.
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.
Hence, if the services are covered by Negative 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:
a) 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.
b) 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 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 vocational educational institutions.
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:
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
(please note that the above exemptions stands modified as on date)
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.
Structure meant for Educational Establishment
As per Notification No 25/2012 dated 20.06.2012 Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of a structure meant predominantly for use as an educational establishment.