Service Tax - 'auxiliary educational services' TO schools - Exempted - CBEC clarifies
SCHOOLS these days provide several activities also called services like transportation, computer classes, karate, dance, music, library, canteen, excursions and so on and they charge for each of these items. School education is under the negative list and so is not liable to Service Tax. But what about all these other services ? Recently Schools organisations in many States have organised protest marches against imposition of Service Tax on these activities and some of them have sent representations to the Board.
Yesterday, the CBEC has come out with a clear clarification. Board at the outset refers to statutory provisions:
Section 66D(l) of the Finance Act,1994 (Negative List)
"services by way of -
(i) pre-school education and education upto higher secondary school or equivalent;
(ii) education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force;
(iii) education as a part of an approved vocational education course;".
Notification No. 25/2012-S.T dated 20.6.2012 (Sl. No.9) exempts;
"Services provided to an educational institution in respect of education exempted from service tax,by way of,- (This was Services provided to or by prior to 1.3.2013 - DDT)
(a) auxiliary educational services; or
(b) renting of immovable property;".
Definition (f) in the Notification:
"auxiliary educational services" means any services relating to imparting any skill, knowledge, education or development of course content or any other knowledge-enhancement activity,whether for the students or the faculty, or any other services which educational institutions ordinarily carry out themselves but may obtain as outsourced services from any other person, including services relating to admission to such institution,conduct of examination,catering for the students under any mid-day meals scheme sponsored by Government,or transportation of students,faculty or staff of such institution.
(DDT Comments: Even this sentence appears to be faulty; it should perhapsbe, or any other services which educational institutions not only ordinarily carry out themselves but also may obtain as outsourced services from any other person
or
or any other services which educational institutions do not ordinarily carry out themselves but may obtain as outsourced services from any other person.)
Now Board clarifies:
Services relating to education are exempt from service tax. There are many services provided to an educational institution. These have been described as "auxiliary educational services" and they have been defined in the exemption notification. Such services provided to an educational institution are exempt from service tax. For example, if a school hires a bus from a transport operator in order to ferry students to and from school,the transport services provided by the transport operator to the school are exempt by virtue of the exemption notification.
In addition to the services mentioned in the definition of "auxiliary educational services",other examples would be hostels,housekeeping,security services,canteen,etc.
Thus the apprehensions conveyed in the representations submitted by certain educational institutions and organizations have no basis whatsoever. These institutions and organizations are requested not to give credence to rumours or mischievous suggestions. If there is any doubt they are requested to approach the Chief Commissioner concerned.
Services provided to the schools are exempted, but the moot question is are the services provided by the schools exempted? If the school provides bus transport or canteen or hostel, are they liable to pay? Does this mean that if a school hires a bus, there is no tax, but if the school owns the bus, there is tax liability?
This is exactly the point on which the Schools wanted clarification from the Board and the Board has conveniently ignored that question.
Please also see Auxiliary Education Services - Exemption Restricted
CBEC Circular No.172/7/2013-ST, Dated: September 19, 2013