2018 (10) TMI 301 - AAR - GST

UCMAS Abacus Program Denied GST Exemption

In Re: M/s. Omnisoft Technologies Private Limited

The authority ruled that M/s. Omnisoft Technologies Private Limited is not entitled to the exemption under Notification No. 12/2017-Central Tax (Rate) for ... Exemption from GST - training or coaching - recreational activities or not - UCMAS (Universal Concept Mental Arithmetic System) - The activity provided by UCMAS using abacus whether qualifies for exemption from the payment of GST? Held that:- As per Sl. No. 80 of Notification No. 12/2017-Central Tax (Rate) exempts services by way of training or coaching in recreational activities relating to arts or culture or sports. (In case of training or coaching in recreational activities relating to sports, exemption is admissible only when such services are by charitable entities registered under section 12AA of the Income-tax Act) - The words ‘recreational activities’ and ‘arts’ have not been defined in the GST Acts or Notifications issued thereunder. As per the dictionary meaning, ‘Art’ is the expression or application of human creative skill and imagination, typically in a visual form such as painting or sculpture, producing works to be appreciated primarily for their beauty or emotional power - The improvement of speed and accuracy of calculations or development of mental capabilities, such as, concentration, observation, visualization, imagination and memory cannot be said to fall within the meaning of ‘Art’. It is evident from the dictionary meaning of the term ‘Art’ as well as from the relevant entries of the scheme of classification of services, as reproduced above, that the activities of the applicant do not fall within the term ‘Art’. Therefore, the exemption provided vide Sl. No. 80 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 issued under the CGST Act, 2017 and corresponding Notification issued under the GGST Act, 2017 and Sl. No. 83 of Notification No. 9/2017-Integrated Tax (Rate) issued under the IGST Act, 2017 is not admissible to the activities of the applicant - Further, the training imparted by the applicant to create interest in students for more advance form of mathematics so as to enhance their thinking capacity and mental development or employing methods of play involving Musical, Visual and specialized effects does not make the activities of the applicant as the training or coaching in recreational activities. Ruling:- M/s. Omnisoft Technologies Private Limited is not entitled to the exemption provided vide Sl. No. 80 of Notification No. 12/2017Central Tax (Rate) dated 28.06.2017 issued under the CGST Act, 2017 and corresponding Notification issued under the GGST Act, 2017 and Sl. No. 83 of Notification No. 9/2017-Integrated Tax (Rate) issued under the IGST Act, 2017. Hence the activity provided by UCMAS using abacus does not qualify for exemption from the payment of Goods and Services Tax. Issues Involved:1. Whether the activity provided by UCMAS using abacus qualifies for exemption from the payment of GST under Notification No. 12/2017-Central Tax (Rate) and corresponding notifications under GGST and IGST Acts.Issue-Wise Detailed Analysis:1. Exemption Eligibility under Notification No. 12/2017-Central Tax (Rate):The applicant, engaged in IT business and education sector, sought an advance ruling on whether their UCMAS program using abacus qualifies for GST exemption. The core of the applicant's argument is based on Entry No. 80 of Notification No. 12/2017-Central Tax (Rate), which exempts services by way of training or coaching in recreational activities relating to arts or culture, or sports by charitable entities registered under section 12AA of the Income-tax Act.The applicant contended that their UCMAS program, which uses tools like abacus and techniques such as mental mapping and mnemonics to enhance children's cognitive skills, falls under recreational training services. They argued that the program promotes whole brain development and establishes foundational skills like memory, concentration, creativity, and problem-solving, which they believe qualifies as recreational activity related to an art.2. Definition and Interpretation of 'Art' and 'Recreational Activities':The authority examined the definitions and interpretations of 'art' and 'recreational activities' as per the GST Acts and relevant notifications. It was noted that these terms are not explicitly defined in the GST Acts. According to the dictionary, 'art' is defined as the expression or application of human creative skill and imagination, typically in a visual form such as painting or sculpture, producing works to be appreciated primarily for their beauty or emotional power.The authority concluded that the improvement of speed and accuracy of calculations or development of mental capabilities such as concentration, observation, visualization, imagination, and memory do not fall within the meaning of 'art'. The scheme of classification of services under Heading 9996, which includes 'Recreational, Cultural and Sporting services', was also referred to, and it was determined that the applicant's activities do not fall within the term 'art'.3. Analysis of Similar Judicial Decisions and Notifications:The applicant referred to previous judicial decisions and notifications under the Finance Act, 1994 (Service Tax), which provided exemptions to similar activities. However, the authority noted that these notifications are not pari-materia to Sr. 80 of Notification No. 12/2017-Central Tax (Rate). Additionally, the decision of Hon’ble CESTAT in the case of Abacus Brain Study (P) Ltd. is pending before the Hon’ble Supreme Court, and as per the Supreme Court's ruling in Union of India Vs. West Coast Paper Mills Ltd., once an appeal is entertained by the Supreme Court, the judgment of the lower court or tribunal is in jeopardy.4. Conclusion and Ruling:The authority concluded that the activities performed by the applicant do not qualify as 'art' or 'recreational activities' as per the relevant GST notifications. Consequently, the exemption provided under Sl. No. 80 of Notification No. 12/2017-Central Tax (Rate) and corresponding notifications under GGST and IGST Acts is not admissible to the applicant's activities.Ruling:M/s. Omnisoft Technologies Private Limited is not entitled to the exemption provided under Sl. No. 80 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and corresponding notifications under GGST and IGST Acts. Therefore, the activity provided by UCMAS using abacus does not qualify for exemption from the payment of Goods and Services Tax.