2021 (7) TMI 809 - AAAR - GST

Appellate Authority Confirms GST on Educational Services & Supplies

The appellate authority upheld the Advance Ruling, confirming that the appellant's educational services, hostel fees, and sale of textbooks are subject to ... Exemption under Entry No. 66 of Notification No. 12/2017-Central Tax (Rate) - meaning of 'educational institution' in Para 2(y) of Notification No. 12/2017-Central Tax (Rate) - strict interpretation of exemption notifications - Service Accounting Code 9992 / 999293 - commercial training and coaching services - value of supply and exclusion for pure agent (Rule 33 of CGST Rules) - composite supply and principal supply (Section 2(30) and Section 8(a) of CGST Act) - classification of sale of printed books under composite supplyExemption under Entry No. 66 of Notification No. 12/2017-Central Tax (Rate) - meaning of 'educational institution' in Para 2(y) of Notification No. 12/2017-Central Tax (Rate) - strict interpretation of exemption notifications - Whether the coaching and training programmes offered by the appellant qualify as exempt 'educational institution' services under Entry No. 66 of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017 - HELD THAT: - The authority examined the three limbs of Para 2(y). The appellant does not provide pre-school or education up to higher secondary (sub-clause (i)) nor approved vocational education courses (sub-clause (iii)). To fall under sub-clause (ii) an institution must provide education as part of a curriculum that leads to a qualification recognised by law and must itself deliver that part of the curriculum leading to the recognised qualification. The coaching given by the appellant prepares aspirants to appear for examinations conducted by statutory bodies but does not itself conduct the examinations or award the statutory qualification; attendance at the appellant's courses is not a mandatory element of the statutory qualification process. Applying settled principles that exemption notifications must be strictly construed, the authority held that the appellant has not satisfied the conditions of Para 2(y)(ii) and therefore does not qualify as an 'educational institution' entitled to exemption under Entry No. 66. [Paras 13, 14, 15, 16]The services rendered by the appellant are not exempt under Entry No. 66; the appellant does not qualify as an 'educational institution' within Para 2(y) of Notification No. 12/2017.Service Accounting Code 9992 / 999293 - commercial training and coaching services - What is the Service Accounting Code (SAC) applicable to the appellant's services - HELD THAT: - The Scheme of Classification of Services includes coaching and tutorial classes under SAC 999293 as commercial training and coaching services. Given the appellant's activities are coaching/training (not falling within the exemption), their services are classifiable under the said SAC in accordance with the notified scheme. [Paras 17]The services are classifiable under SAC 9992-999293 - Commercial training and coaching services.Value of supply and exclusion for pure agent (Rule 33 of CGST Rules) - Section 15 - valuation of taxable supply - Whether amounts collected by the appellant as examination fees and other fees on behalf of recognised institutes/universities are includible in the appellant's taxable value or can be excluded as a 'pure agent' under Rule 33 - HELD THAT: - Section 15 provides the basic rule that the entire consideration received is taxable. Rule 33(1) permits exclusion of expenditure/costs incurred by a supplier as a 'pure agent' where specified conditions are satisfied: (i) the supplier acts as a pure agent with recipient's authorization; (ii) the payment is separately indicated in the invoice; and (iii) the supplies procured as pure agent are in addition to the supplier's own services. If the appellant satisfies these conditions when collecting and remitting examination/other fees, the amounts so collected can be excluded from the value of taxable supply; otherwise they form part of taxable consideration. [Paras 18]Amount collected and remitted as examination/other fees can be excluded from taxable value only if the conditions of Rule 33 are fulfilled; otherwise they are includible in the appellant's taxable consideration under Section 15.Composite supply and principal supply (Section 2(30) and Section 8(a) of CGST Act) - Service Accounting Code 9992 / 999293 - commercial training and coaching services - Whether the hostel facility (charged to enrolled students at concessional rates) forms part of a composite supply with the appellant's coaching services and the tax consequence thereof - HELD THAT: - A composite supply consists of two or more supplies that are naturally bundled with one principal supply. The appellant charges lower hostel fees to enrolled students than to outside residents and supplies hostel services together with coaching as a packaged offering. In the absence of an explanation for differentials and given that the hostel concession appears as part of the package for enrolled students, the hostel service is naturally bundled with the coaching and the coaching is the principal supply. Under Section 8(a), the composite transaction must be treated as the principal supply, and the entire supply is classifiable and taxable as the principal service (SAC 9992-999293). The appellant's contention that hostel is a standalone supply is rejected on the facts. [Paras 19]Hostel facility provided to enrolled students forms part of a composite supply whose principal supply is coaching; the entire composite supply is taxable as SAC 9992-999293.Composite supply and principal supply (Section 2(30) and Section 8(a) of CGST Act) - classification of sale of printed books under composite supply - Whether sale of text books and printed course material to the appellant's students is taxable or exempt - HELD THAT: - The appellant sells course books to students at concessional rates compared to outside purchasers. Those supplies to enrolled students are made together with coaching services as part of a package. On the same reasoning applied to hostel services, the sale of books to students is treated as part of the composite supply where coaching is the principal supply. Under Section 8(a) the entire composite supply is to be treated as the principal supply and taxed accordingly. The appellant's reliance on exemption for printed books in other contexts does not override the classification of the composite transaction. [Paras 20]Sale of text books to the appellant's students is part of the composite supply with coaching and is taxable as SAC 9992-999293.Final Conclusion: The appeal is dismissed. The Advance Ruling is upheld with modifications stated: the appellant's coaching services are not exempt under Notification No. 12/2017 (Entry 66) and are classifiable under SAC 9992-999293 (commercial training and coaching); amounts collected and remitted as examination/other fees may be excluded from taxable value only if Rule 33 (pure agent) conditions are satisfied; hostel charges and sale of books to enrolled students form part of a composite supply with coaching and are taxable as the principal supply. Issues Involved:1. Exemption from GST for education programs and training.2. Service Accounting Code (SAC) classification.3. Tax liability on collecting and transferring examination fees.4. Tax liability on hostel fees.5. Tax liability on selling textbooks.Issue-wise Analysis:Issue Nos. 1, 2, and 3: Exemption from GST for Education Programs and TrainingThe appellant argued that their educational services should be exempt from GST as they provide lecture classes and notes based on syllabi published by government-recognized institutions. However, the appellate authority determined that the appellant's institution does not fit the definition of an 'educational institution' under Para 2(y) of Notification No. 12/2017-Central Tax (Rate), as they do not provide elementary education, education up to higher secondary, or vocational education. The appellant's services do not lead to qualifications recognized by law. Therefore, the services are not exempt from GST as per entry no. 66 of the Notification No. 12/2017-Central Tax (Rate).Issue No. 4: Service Accounting Code (SAC) ClassificationThe services provided by the appellant fall under 'SAC – 9992-999293 – Commercial training and coaching services' as per the Scheme of Classification of Services notified in Notification No. 11/2017-Central Tax (Rate).Issue No. 5: Tax Liability on Collecting and Transferring Examination FeesSection 15 of the CGST/SGST Act, 2017, specifies that the entire consideration received by the supplier is liable to GST. However, if the appellant acts as a 'pure agent' as per Rule 33 of the CGST Rules, 2017, the amount collected as examination fees can be excluded from the value of taxable supply.Issue No. 6: Tax Liability on Hostel FeesThe coaching/training provided by the appellant along with hostel facilities qualifies as a composite supply under Section 2(30) of the CGST Act, 2017. The principal supply being educational services, the entire supply falls under 'SAC-9992-999293 – Commercial training and coaching services' and is liable to GST at the rate applicable for the principal supply.Issue No. 7: Tax Liability on Selling TextbooksThe sale of textbooks to students is also considered a composite supply along with educational services. As per Section 8(a) of the CGST/SGST Act, 2017, the entire supply is treated as 'SAC-9992-999293 – Commercial training and coaching services' and is liable to GST at the rate applicable for the principal supply.Conclusion:The appellate authority upheld the Advance Ruling No. KER/76/2019, dated 20/5/2020, with modifications. The appeal filed by the appellant was rejected, confirming that the educational services, hostel fees, and sale of textbooks provided by the appellant are subject to GST.