Service Tax - Construction Company partnering with education society to provide secondary education - service provided by applicant (a person) to 'partnering person' (another person) for consideration will be service - AAR

By Vijay Kumar

TWO persons entered into a partnering agreement to run a school. One partner would be responsible for the entire infrastructural requirement of the educational institution while the other would be responsible for the entire academic aspect and related requirements of the educational institution. The agreement is for a term of thirty years and it has been agreed between the Parties that any revenue generated from the project, during the term, will be shared by the parties in the ratio agreed in the Agreement.

One of the partners approached the Authority for Advance Ruling seeking a ruling whether the partners are liable to pay Service Tax on the revenue share.

The AAR last week ruled that the applicant and the partner are separate persons and service provided by the applicant (a person) to “partnering person” (another person) for consideration will be a service.

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