COACHING SERVICES: ISSUES CLARIFIED BY AAR

Coaching services, as an aid or facilitator to main stream education system in India, are popular so much so that these are now considered as a necessary input for students pursuing education at secondary and above level in schools or at higher level who are also preparing for competitive examinations. Coaching services are popular in the streams of commerce (CA, CS, CWA etc), law (LLB, judicial), science (medical, engineering), civil services and the like.

Coaching services could be provided online or offline and as a pure imparting of a coaching or a comprehensive or consolidated service including one or more supply of goods or services (for example, books and publications, printed notes, bags, uniforms, accommodation etc). Coaching services could also be provided directly by the coaching institute or through on outsourced agency on franchise model basis.

In one of the recently pronounced advance ruling in the case of IN RE: M/S. SYMMETRIC INFRASTRUCTURE PRIVATE LIMITED [2021 (9) TMI 482 - AUTHORITY FOR ADVANCE RULING, RAJASTHAN] clarified on certain issues in relation to coaching services and its taxability.

Factually, the applicant intended to provide coaching services to its enrolled students under its supervision through Network partner. The applicant shall appoint Network Partner in different cities/towns for rendering and providing, on principal-to-principal basis, training /coaching and other related ancillary functions/services for the courses decided by applicant to its enrolled students. The applicant shall provide study material and student kit which will include test paper, printed material, uniform, bags and other goods. The applicant will also decide the schedule of course, schedule of method of teaching, training/coaching and education to the students. Students enrolled with the applicant will be charged a consolidate amount which will include the supply of goods and / or services, i.e., service of coaching and other supply of related goods like bag, uniform etc. Applicant will raise tax invoice to students who wishes to enroll with the applicant. Network Partner shall carry out/conduct course classes offered by the applicant at its premises for the students enrolled with the applicant. Network Partner shall engage qualified, experienced and competent faculty for teaching the courses offered by the applicant. Fees collected from the students will be deposited in an Escrow account. For such coaching services provided to applicant. Network Partner will raise an invoice of    coaching  charges to the applicant  for the  services provided.

The Network Partner will collect all fees from the registered students in timely manner and shall deposit in designated Escrow bank account. Applicant shall issue tax invoice to the students who wishes to enrol with it, of a consolidate amount (which includes coaching service and other related goods) which may be collected by the network partner and deposit the same in the said escrow account. Network Partner shall issue tax invoice for Service charge to the applicant for its coaching services (and other related managerial/ancillary services) in respect of various offline/Online Courses of the applicant.

Obligation of network partners would include:

1. Conducting Courses offered by applicant at its Premises for registered students of applicant as per guidelines of applicant.
2. At its own cost and expense, maintaining adequate number of qualified, experienced and competent faculties for teaching Physics. Chemistry. Biology, Mental ability, Mathematics and other subjects as per requirements of the Courses.
3.  Conducting periodical tests in respect of the Courses and check answer books for performance evaluation of the students.
4. Selling registration / admission forms, getting the admission forms filled, collecting the courses fees and maintaining records of enquiries, admission packets sale, students enrolled with applicant without any delay. Deposit of collection towards registration / admission and course fee from enrolled students in the designated Bank Account.

Obligation of main coaching institute would include:

1. Facilitate / assist in Appointing/ the faculty in consultation and approval of the network partner.
2. Preparing and providing-

(a)       high quality printed study materials,

(b)       soft copy of examination papers,

(c)       soft copy of course planners, and

(d)       soft copy of annual schedule or any changes in any of the above papers.

3. To provide Student Kit's to all registered students
4. communicating in time any changes in any of study material, student kits, examination papers, course planners, and annual schedule or any changes in any of the above
5. Deciding schedule of courses, schedule of methods of teaching, training / coaching and education to the students undergoing training / coaching with the object of not only facilitating success in targeted competitive examination but also build self-confidence to face stiff standards set for competitive examinations;
6. Conducting motivational, counselling and conducting an 'In-house Career Orientation Session(s) or Seminar(s)' at the said Premises during the course.

Following questions were sought to be clarified:

1. Applicant supplies services of coaching to students which also includes along with coaching, supply of goods/printed material/test papers, uniform, bags and other goods to students. Such supplies are not charged separately but a consolidated amount is charged, the major component of which is imparting of coaching. In such circumstances, whether such supply shall be considered, a supply goods or a supply of services?
2. If it is held to be a supply of service, whether such supply shall be considered as composite supply? If yes, what shall be the principal supply?
3. Applicant provides coaching service under a business model through Network Partners as per sample agreement attached, containing obligations of Applicant and Network partners. Accordingly, the network partner provides the services to the students on behalf of Applicant. In such a case, who shall be considered as supplier of service and recipient of service under the agreement?
4. What shall be the value of service provided by Applicant to students and by network partner to Applicant?
5. Whether both, Applicant and network partner can avail eligible ITC for their respective supplies?

The AAR, Rajasthan answered the questions as follows:

Q. l      Applicant supplies services of coaching to students which also includes along with coaching, supply of goods/printed material/test papers, uniform, bags and other goods to students. Such supplies are not charged separately but a consolidated amount is charged, the major component of which is imparting of coaching. In such circumstances, whether such supply shall be considered, a supply of goods or a supply of services?

Ans.    Supply by the Applicant will be considered 'Supply of Service'.

Q. 2     If it is held to be a supply of service, whether such supply shall be considered as composite supply? If yes. what shall be the principal supply?       

Ans.    Yes, such supply shall be considered as Composite supply, and Coaching service shall be principal supply.

Q.3      Applicant provides coaching service under a business model through Network Partners as per sample agreement attached, containing obligations of Applicant and Network partners. Accordingly, the network partner provides the services to the students on behalf of Applicant. In such a case, who shall be considered as supplier of service and recipient of service under the agreement?

Ans.    Applicant will be service provider to the students and Network partner will be service provider to the applicant.

Q.4      What shall be the value of service provided by Applicant to students and by network partner to Applicant?

Ans. Total consolidated amount charged for which Tax invoice generated by the applicant will be the value of service supply by the applicant.

Q.5      Whether both, Applicant and network partner can avail eligible ITC for their respective supplies?

Ans.    Applicant can avail eligible ITC as per provisions of GST Act, 2017.

The AAR did not answered on the issue of eligibility of ITC to the channel partner but restricted the answers to the applicant coaching services provider only.