THE ENACTMENT Before amendment was,
Serial
no. 9 of mega exemption notification read as follows:-
"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
above exemption states that any services related to auxiliary educational
services or renting of immovable property if either provided to education
institution or even if it is provided by an educational institution which is
providing the exempted services; will be exempted. In other words, if
educational institution is either service provider or service receiver of
auxiliary educational services / renting of immovable property services; the
same shall be exempted. The auxiliary educational services have been defined in
the mega exemption notification as follows:-
(f)
v
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 ;
Thus,
the auxiliary educational services include the any service relating to
imparting any skill or knowledge, etc. for students or faculty, conduct of
examination, transportation of students, faculty or staff, etc.
THE AMENDMENT:- ( The serial no. 9 has
been amended vide notification no. 3/2013-ST dated 1.3.2013 which is effective
from 1.4.2013. After this amendment, the new serial no. 9 will read as
follows:- )
9. Services provided to an educational institution in respect of education exempted
from service tax, by way of,-
(a) auxiliary educational services; or
(b) renting of immovable property;
Thus,
after this amendment, only the auxiliary educational services or renting of
immovable property will be exempted only if these are PROVIDED TO educational
institution which is providing exempted services. Thus, w.e.f. 1.4.2013, if the
educational institution is service recipient of auxiliary educational services
or renting of immovable property services, then only, the exemption will be
applicable.
Implications of amendment:-
Before
this amendment, auxiliary educational services or renting of immovable property
services were exempted in both the cases when received as well as when provided
by the educational institution (which is providing the exempted services).
However, after this amendment, only the renting or auxiliary educational
services provided to educational institution will be exempted. In other words,
the services like training programs, etc., transportation of students, faculty
or staff; if provided to educational institution will be exempt. However, if the same services are provided by
the educational institution, these will be taxable. Similarly, if the
renting of immovable property service is being provided to education
institution; it will be exempted; however, if the education institution has
provided the renting of immovable property service to any person (other than an
education institution which is providing the exempted services); the same shall
be taxable. For eg. If the education institution owns buses and provides these
services to their students, staff, etc. against a consideration the same shall
be taxable w.e.f. 1.4.2013. Even if the contractor is engaged for
transportation of the students and staff, then too, the service tax would be
levied. This can be elucidated by following example:-
|
S. No.
|
Situation
|
Taxable or not
|
|
1
|
Education
institution owns buses and provides transportation services directly to the
students & staff.
|
Yes
|
|
2
|
Education
institution hires contractor for transportation. Charges are recovered by
contractor directly from students.
|
Yes
|
|
3
|
Education
institution hires contractor for transportation. Charges are recovered by
contractor from institution which in turn charge the same from the students
|
Yes
|
Thus,
in any case, the transportation facility will be chargeable to service tax as
no exemption has been given to any of the above cases in the mega exemption
notification. Moreover, there may be one more ambiguity in the case where the
transportation services are provided free of cost to the staff. In this case,
department may contend that non-monetary consideration is involved and demand
the service tax accordingly. Similarly, if the education institution has let
out its premises to some other person for being used, like canteen is let out
to an independent contractor who runs the same, service tax would be levied by
virtue of this amendment. These are only few instances and there may be a
number of other cases too where this small amendment may have vital impact.
Conclusion
The above amendment
has been brought to cover the cases like where the education institution has
let out a premise to any commercial concern. Previously, these transactions
were also exempt. However, w.e.f. 1.4.2013; such cases will be taxable. But
this amendment has also brought some severe consequences like the
transportation of students, staff, training programs conducted by the education
institution over and above the normal education against a consideration will
also become taxable which does not seems to be intention of the government. But
till any further clarification, this amendment will continue narrowing the
scope of entry no. 9 of the mega exemption notification.
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