Know all about applicability of GST on Educational Services
GST is an indirect tax levied on all goods and services in India. With the Government aiming to provide education to every child, essential educational services have been kept out of the ambit of GST. The GST Act tries to maintain a fine balance whereby core educational services provided and received by educational institutions are exempt. However, certain educational courses and training programmes attract GST and are taxed at the standard rate of 18%. Hence, the applicability of GST would depend on the type of course and its provider.
How is ‘education’ defined under GST?
The CGST Act does not expressly define the term education. However, as per Sole Trustee Loka Shikshana Turst vs Commissioner Of Income Tax (28 August, 1975) what education is the process of training and developing the knowledge, skill, mind and character of students by formal schooling.
How are education services classified under GST?
According to Notification No. 11/2017-Central Tax (Rate), education servicesare classified under Heading 9992.
What education services are exempt under GST?
According to Notification No. 12/2017-Central Tax (Rate), thebelow mentioned educational services are exempt under GST.
1.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 Central Government, State Government or Union territory
iii. security or cleaning or housekeeping services performed in such educational institution
iv. services relating to admission to, or conduct of examination by, such institution; upto higher secondary
Provided that nothing contained in entry (b) shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent
2. Services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programmes, except Executive Development Programme
a. two year full time Post Graduate Programmes in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT) conducted by the Indian Institute of Management
b. fellow programme in Management
c. five year integrated programme in Management
What do you mean by an educational institution?
Educational institution means an institution providing services by way of
- pre-school education and education up to higher secondary school or equivalent
- education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force
- education as a part of an approved vocational education course
What do you mean by an approved vocational education course?
Are services provided by way of education as a part of a prescribed curriculum for obtaining a qualification recognized by a law of a foreign country exempt under GST?
No, in order to be exempt under GST a course should be recognized by an Indian law.
Are education services provided by private coaching institutes for obtaining a qualification recognised by any law exempt under GST?
Only those institutions, whose operations conform the definition of the term “Educational Institution”, would be treated as entitled to avail exemption under GST. Therefore, private coaching centres or other unrecognized institutions, though self-styled as educational institutions, would not be treated as educational institutions under GST and thus cannot avail exemptions available to an educational institution.
Are education services provided by educational institutions for Lower Secondary level exempt under GST?
Educational institutions up to Higher Secondary School are not liable to pay GST on output services. Therefore, education services provided by educational institutions for Lower Secondary level are exempt under GST.
Are hostel lodging services provided by educational institutions which are providing higher secondary education, exempt under GST?
Output services of lodging/boarding in hostels provided by such educational institutions which are providing:-
- pre-school education
- education up to higher secondary school or equivalent
- education leading to a qualification recognised by law
are fully exempt from GST.
Annual subscription/fees charged as lodging/ boarding charges by such educational institutions from its students for hostel accommodation shall not attract GST.
IIM Bangalore provides certain Executive Development Programs. Are these services exempt under GST?
Output services related to the specified courses provided by IIM’s would be exempt. Executive Development Programs run by the IIM’s are specifically excluded, hence such courses would be subject to GST.
Are placement services provided for securing job placements by colleges liable to GST?
- The supply of placement services provided to educational institutions for securing job placements for the students shall be liable to GST.
- Educational institutes such as IITs, IIMs charge a fee from prospective employers like corporate houses/ MNCs, who come to the institutes for recruiting candidates through campus interviews in relation to campus recruitments. Such services shall also be liable to GST.
Can a person who is providing exempt education services avail the benefit of Input Tax Credit (ITC)?
Regarding input services, it is to be noted that where output services are exempted, the Educational institutions may not be able to avail credit of input tax paid.
Who is liable to pay GST for educational services?
Education Services are liable to GST under forward charge. Therefore, GST shall be paid by the supplier of services.
What will be the Place of Supply of Educational Services?
Place of Supply can be determined in two situations:-
Where the location of supplier of services and the location of the recipient of services is in India
As per section 12(6) of the IGST Act, 2017, the place of supply of services provided by way of admission to an educational event or any other place and services ancillary thereto, shall be the place where the event is actually held or such other place is located. Thus, in general, the place of supply of education services by Indian institutions would be the place where the education institution is located.
As per section 12(7) of the IGST Act, 2017, the place of supply of services provided by way of:
a. organisation of an educational event including supply of services in relation to a conference, fair, exhibition, celebration or similar events; or
b. services ancillary to organisation of any educational events or services, or assigning of sponsorship to such events: –
i. To a registered person, shall be the location of such person
ii. To a person other than a registered person, shall be the place where the event is actually held and if the event is held outside India, the place of supply shall be the location of the recipient.
Where the location of the supplier of services or the location of the recipient of services is outside India
As per section 13(5) of the IGST Act, 2017, the place of supply of services supplied by way of admission to, or organisation of an educational and of services ancillary to such admission or organisation, shall be the place where the event is actually held.
What exemption will be available if an educational institution is run by a charitable organization?
Apart from the general exemption available to all educational institutions, charitable activities of entities registered under Section 12AA of the Income Tax Act is also exempt.
Therefore, if trusts are running schools, colleges or any other educational institutions or performing activities related to advancement of educational programmes specifically for abandoned, orphans, homeless children, physically or mentally abused persons, prisoners or persons over age of 65 years residing in a rural area, then these activities will be considered as charitable.
Income from such services will be wholly exempt from GST as per Notification No.12/2017- Central Tax (Rate).
Are services of lodging and providing food facilities by boarding schools exempt under GST?
- Boarding schools provide service of education coupled with other services like providing dwelling units for residence and food.
- Such services in the case of boarding schools are naturally bundled and supplied in the ordinary course of business (if the charges for education and lodging and boarding are inseparable).
- In this case since the predominant nature is determined by the service of education, the other service of providing residential dwelling will not be considered for the purpose of determining the tax liability and in this case the entire consideration for the supply will be exempt.
Are lodging services provided by a college which provides dual qualification out of which only one of which is recognized by law, taxable under GST?
- Provision of dual qualifications is in the nature of two separate services as the curriculum and fees for each of such qualifications are prescribed separately. Service in respect of each qualification would, therefore, be assessed separately.
- If an artificial bundle of service is created by clubbing two courses together, only one of which leads to a qualification recognized by law, then it shall be treated as a mixed supply. The taxability will be determined by the supply which attracts highest rate of GST.