SERVICE TAX ON SERVICES PROVIDED TO THE EDUCATIONAL INSTITUTIONS

SERVICE TAX ON SERVICES PROVIDED TO THE EDUCATIONAL INSTITUTIONS

What is covered in Mega  Exemption Notification?

POINT NO. 9 OF MEGA EXEMPTION NOTIFICATION

Services Provided TO An Educational Institution In respect of Education

Exempted from Service Tax By Way of (i)  Auxiliary Educational Services (ii) Renting of Immovable Property

Important Points:

·         Definition of “Auxiliary educational services” is a very wide definition and it covers almost all the activities which may be provided to educational institutions by external service providers. Practically, all the services provided to educational institutions will fall within the definition of “Auxiliary educational services”.

·         But, mere inclusion of an activity under the definition of “Auxiliary educational services” does not grant that activity exemption from service tax under this clause. The exemption of “Auxiliary educational services” provided to educational institution is in fact an illusion.

·         If we again look into the starting wordings of this point no. 9, it starts from “Services provided to educational institutions in respect of education exempted by way of……”.

·         Here the phrase “in respect of education” is a very important part of the exemption. By its effect, only those auxiliary educational services which are provided in respect of education will be exempt under this point.

Analysis of the above Defination:

Nature of Services Provided to Educational Institution	Covered in Auxiliary Educational Services [Yes/No]	Can be said to be provided “in respect of education” [Yes/No]	Availability of Exemption under Point No. 9(i) of Mega ExemptionNotification [Yes/No]*
Works Contract Services(WCS)**	Yes	No	No
Transportation Services***	Yes	No	No
Security Services	Yes	No	No
Outdoor Catering	Yes	No	No
Horticulture Services#	Yes	No	No
Placement Agency Services	Yes	No	No
Supply ofManpower Services	Yes	No	No
Advertisement Services	Yes	No	No

*here it is to be noted that above services may be exempted under any other point of mega exemption notification.

Clause (ii) of point no. 9 of Mega Exemption Notification

Renting of Immovable Property Service

 It may be interpreted that if a building is given on rent for running of school/college/institution, then benefit of point 9(ii) can be taken.

**Work Contract Service

 As you seen above,WCS not covered in Mega exemption. Also there is a clause number 13(c) of Mega Exemption Notification which covers:

Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of;

 a building owned by an entity registered under section 12AA of the Income Tax Act, 1961 and meant predominantly for religious use by general public.

Generally all educational institutions are registered under section 12AA of the income tax act, but there is a second cumulative condition in this clause. The said building should be meant for religious use by general public. If we go by the definition of “Religious Place”, a building owned by an educational institution generally cannot be said to be meant for religious use by general public. Thus a provider of works contract service to an educational  institution cannot take the benefit of exemption under clause 13(c) of mega exemption notification.

***Transportation Services

Regarding transportation point no 23 of Mega exemption covers as follows:

Transport of passengers with or without accompanied belongings by

 a contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire;

It means if vehicle owner charges on per student basis based on distance travelled, it becomes contract carriage operator under clause 23 and its services provided to school will be exempt under clause 23.

However, If vehicle owner charges school on fixed hire basis, then vehicle operator will be out of exemption clause 23 by virtue of the exception provided therein and he cannot take benefit of point no. 23 of the mega exemption notification.

# Horticulture Services

In the Negative list, following entry appears:

Services relating to agriculture or agricultural produce

By way of  i.            Agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing.  ii.            …………..   iii.            ………….       iv.            ………….. to viii

Thus it is quite clear that the horticulture is covered under the term agriculture and services in relation of agriculture and agricultural produce are covered under negative list and hence not taxable.