Education is costly affair, after all!

By Vijay Kumar

THE levy of service-tax on students will not 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. - 2006-TIOL-35-HC-KERALA-ST

In the matter of representations received from various schools, Associations etc. seeking clarifications regarding the levy of service tax on certain services relating to the education sector, the CBEC in its Circular 172/7/2013-ST dated 19 September 2013 emphatically said -

"…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."

And this was the clarification given -

3. By virtue of the entry in the negative list and by virtue of the portion of the exemption notification, it will be clear that all 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.

4. In addition to the services mentioned in the definition of "auxiliary educational services", other examples would be hostels, housekeeping, security services, canteen, etc.

Incidentally, take a look at the evolution of the Entry no. 9 of the Mega Exemption Notification 25/2012-ST -

9. 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;

The words "or by" went for a toss by the amending notification 3/2013-ST dated 01 March 2013 w.e.f 01.04.2013.

The JS TRU letter dated 28/02/2013 also said -

Actually, things went downhill because of the removal of these two words "or by" inasmuch services provided by the Educational institution now fell in the rain shadow exemption region!

The Circular did say about everything else but but skirted the issue on which the Educational Institutions & others actually wanted a response.

DDT had vividly covered this issue in its edition 2194 dated 20 September 2013.

And then came the notification 6/2014-ST dated 11 July 2014 which substituted Entry no. 9 to read -

9. Services provided,-

(a) by an educational institution to its students, faculty and staff;

(b) to an educational institution, by way of,-

(i) transportation of students, faculty and staff;

(ii) catering, including any mid-day meals scheme sponsored by the Government;

(iii) security or cleaning or house-keeping services performed in such educational institution;

(iv) services relating to admission to, or conduct of examination by, such institution;"

So, in a way the position prevailing prior to 01.04.2013 was restored.

DDT made a reference to this notification while reporting the 'Budget Notifications at a glance' in its episode 2394.

Interestingly, the 'interregnum period' cried for attention but there was no one to attend to the wailing child.

One of our regular writers, P G James has sent us a mail enclosing the following newspaper cutting-

He employed the RTI Act, 2005 and found that all this was the offshoot of an innocuous Board letter dated January 7, 2016.

In fact, he has exhaustively deliberated on this issue in his article which we are carrying in our Guest Column today.