Is it Fair for A Government to Tax Education?
IN Malappuram District Parallel College Association case - , the Kerala High Court observed,
"Of course, article 41 also provides that the State shall within its economic capacity and development make effective provision for securing the right to work to education and to public assistance in cases of unemployment, old age, etc. There is certainly force in the contention of the petitioners that even if the State is not able to finance higher education as required under the Directive Principles of State Policy under article 41 of the Constitution, it should not deny and discourage opportunities for education by adding cost to it in the form of tax on education which will certainly disable the economically weaker sections from pursuing higher studies. Addl. Solicitor General of India appearing for the respondents submitted that so many educational institutions are mushrooming and education is carried on as business. Therefore, according to him, there is no illegality or even impropriety in levying tax on such educational institutions. I am unable to appreciate this apprehension of the Government because this malady has to be corrected only by levying income-tax on the institutions and not by licensing the institutions to collect service-tax from students. In fact section 10(22) of the IT Act which granted blanket income-tax exemption for educational institutions is now deleted and exemption is provided with moderation in section 10(23C) of the said Act. Of course, section 11 of the IT Act which provides cover to large number of tax evaders under the guise of charity will continue to protect educational institutions as charity includes education also. If education is run on business lines, then solution is to amend section 11 and other relevant provisions of the IT Act withdrawing the exemptions to institutions and Government can simultaneously provide financial aid to beneficiaries which will put an end to misuse of income-tax provisions. Therefore I do not think the levy of service-tax on students will serve the purpose of disciplining those who make business out of education. Tax on education, particularly when the incidence of tax is passed on to the beneficiaries, that is, the students, is a regressive legislation and has to be condemned, more so, when large number of poor people seek salvation through education and employment."
The Court said that it had to uphold the levy no matter whether the Court considers the levy unwise, improper or even a regressive measure, which is a policy matter to be left to the wisdom of the Legislature.
If these commercial coaching centres are fleecing the students, it is unfair, unjust and unsocial for the State also to join to extract its pound of flesh from the students who flock to these institutions with a hope of getting a job. All the students in these crass commercial coaching centres are not the very rich ones. I know a Sepoy in the Central Excise Department who invested his lifetime savings to admit his son in a private unrecognized college for an MBA course with the hope that he would get a good job. Should you burden this fellow with an additional Service Tax burden? When you wine and dine in a Star hotel where they charge you Rs.100 for a Rs.20 bottle of water, you get an abatement of 60% of the value for payment of Service Tax, but when you pay a college, you don't get any abatement! If Government cannot finance education, the least it should do is to avoid taxing it!
Recently, the issue of taxation of commercial training and coaching was before the Larger Bench of the CESTAT. It was argued before the Larger Bench that there was a fundamental distinction between "education" on the one hand and "training or coaching" on the other. But the Tribunal could not go beyond the Statute and so upheld the levy.
We bring you the Larger Bench Order today. Please see Breaking News.