Service Tax on Educational Services
Service Tax on Educational Services
The education sector is one of the largest sectors in the Indian economy, providing employment and education to millions of people. Educational services rendered by training and coaching centres have come under the service tax net from the 2003 budget. However, there still exists a lot of misinformation about service tax on educational services owing to lack of awareness. In this article, we look at service tax on educational services.
Commercial Training or Coaching Centres
Commercial training or coaching centre is any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than the sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include pre-school coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognised by law for the time being in force.
The services provided by a commercial training or coaching centre falls under the service tax net and service tax is payable on the services rendered by a commercial training or coaching centre.
Service Tax Exemption for Commercial Training or Coaching Centres
A commercial training or coaching centre which provides educational services for which the consideration flows directly to the institute or establishment issuing certificate, diploma, etc., and not to the commercial coaching or coaching centre is however exempt from service tax. In a notification it has been clarified as follows:
“Central Government exempts the taxable services provided by a commercial training or coaching centre, in relation to commercial training or coaching, which form an essential part of a course or curriculum of any other institute or establishment, leading to issuance of any certificate or diploma or degree or educational qualification recognised by law for the time being in force, to any person, from the whole of the service tax leviable thereon under subsection (2) of section 66 of the said Act:
Provided that this exemption shall not be applicable if the charges for such services are paid by the person undergoing such course or curriculum directly to the commercial training or coaching centre.”
Vocational or Recreational Training Institutes
The services provided by a vocational training institute or a recreational training institute is exempt from taxable services. Recreational training institute is a commercial training or coaching centre which provides training or coaching relating to recreational activities such as dance, singing, martial arts or hobbies. Vocational training institute is an Industrial Training Institute or an Industrial Training Centre affiliated to the National Council for Vocational Training, offering courses in designated trades.
Pre-School, Schools, Colleges & Universities
Any pre-school education and education up to higher secondary school or equivalent and training or any coaching or training leading to grant of a certificate or diploma or degree or any educational qualification which is recognised by any law is exempt from service tax. Hence, all services rendered by pre-school, school, college and universities are exempt from service tax.
Further, it has also been clarified that schools running transport services for their students are not liable to pay service tax under the category of tour operator. Thus, the services provided by an education institution like the following are exempt from service tax.
- Transportation of students, faculty and staff;
- Catering, including any midday meals scheme sponsored by the Government;
- Security or cleaning or housekeeping services performed in such educational institution;
- Services relating to admission to, or conduct of examination by, such institution;