Understanding service tax in education sector
Many may
feel the Budget 2012-13 is positive for the education sector, with good
amounts allocated to higher education and school education exempted from
service tax.
It is a rather positive budget as enhanced
allocations have been made to the higher education, skills and
vocational training. Besides the school education has been exempted from
service tax, and for school and university courses, as also approved
vocational studies, have been exempted.
The focus and allocations made to higher education and the skill development programme.
The following services relating to education are specified in the negative list –
(1) pre-school education and education up to higher secondary school or equivalent
(2) education as a part of a prescribed curriculum for obtaining a qualification recognized by law for the time being in force.
(3) education as a part of an approved vocational education course and thus there is no Service Tax on these services.
This exclusion from service tax under Negative List is not a blanket exemption from Service Tax.
`Education
as a part of curriculum for obtaining a qualification recognized by
law' implies that only such educational services are in the negative
list as are related to delivery of education as `a part' of the
curriculum that has been prescribed for obtaining a qualification
prescribed by law. For a service to be in negative list under this entry
the service should be delivered as part of curriculum. Conduct of
degree courses by colleges, universities or institutions which lead
grant of qualifications recognized by law would be covered.
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Training given by private coaching
institutes would not be covered in this entry as such training does not
lead to grant of a recognized qualification and hence will be liable to
Service Tax. However, they can avail the benefit of threshold exemption.
Boarding
schools provide service of education coupled with other services like
providing dwelling units for residence and food. If the charge for
education and lodging and boarding are inseparable then it will be a
case of bundled services. Thus their taxability will be determined as
per terms mentioned under section 66F of the Act. Hence hereby 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.
For a services provided by
way of education as a part of a prescribed curriculum for obtaining a
qualification recognized by Indian law , .i.e. if it is recognized by
law of a foreign country then it won't be covered in this negative list
entry.
Services provided by international schools giving
certifications like IB by way of education up to higher secondary school
or equivalent are covered in this entry.
A course in a college
which leads to dual qualification out of which only one is recognized by
law would be treated as two separate services. 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 under the principles of bundled
services it will attract service tax.
services of conducting
admission tests for admission to colleges in case the educational
institutions are providing qualification recognized by law for the time
being in force are covered under this entry, hence exempt from service
tax.
Placement services provided to educational institutions for
securing job placements for the students not covered in this negative
list entry, hence taxable.
Even the services provided by
educational institutions to prospective employers like corporate houses/
MNCs, who come to the institutes for recruiting candidates through
campus interviews are liable to service tax on the fees charged by as
such services are not covered in the negative list.
Now the
question arises what are courses that would qualify as an Approved
vocational education courses, they have been specified in section 65B of
the Act. These are –
• a course run by an industrial training
institute or an industrial training centre affiliated to the National
Council for Vocational Training, offering courses in designated trades
as notified under the Apprentices Act, 1961(52 of 1961)
• 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, Ministry of Labour and Employment,
Government of India;
• a course run by an institute affiliated to the National Skill Development Corporation set up by the Government of India..
Likewise,
auxiliary educational services and renting of immovable property by
educational institutions in respect of education will not be taxed.
However, coaching classes and training institutions will be taxed.
By: Meenu Garg