Transportation services to school students not exempt from GST under Serial No.66 of Notification 12/2017

The AAAR held that transportation services provided by the appellant to school students and staff are not exempt from GST under Serial No.66 of Notification 12/2017-Central Tax (Rate). The Authority determined that services are supplied directly to students/parents, not to educational institutions, as schools neither provide nor receive transportation services. The appellant collects fees directly from parents under contractual arrangements with schools. Since the service is neither provided by nor to educational institutions, the exemption notification does not apply. The burden of proving exemption availability lies with the service provider, and exemption notifications must be interpreted strictly.

---

---

The core legal questions considered by the Appellate Authority for Advance Ruling (AAAR) in this matter are:

1. Whether the transportation services provided to school students and staff by the appellant qualify as services provided to the educational institution under the relevant GST exemption notification.

2. Whether such transportation services are exempt from Goods and Services Tax (GST) under Serial No. 66 of Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017 or any other applicable provision of the GST Act.

3. The proper identification of the recipient of the service for GST purposes-whether it is the educational institution or the students/staff (or their parents) who pay for the service.

4. The applicability and binding nature of prior Advance Ruling decisions and the scope of Section 103(1) and (2) of the GST Act in relation to the present case.

5. The interpretation of exemption notifications and the burden of proof on the appellant claiming exemption.

Issue-wise Detailed Analysis:

Issue 1: Whether the transportation services provided are services to the educational institution

The relevant legal framework includes Section 2(102) defining 'services', Section 2(105) defining 'supplier', Section 2(93) defining 'recipient', and Serial No. 66 of Notification No. 12/2017-Central Tax (Rate) which exempts services provided by or to educational institutions by way of transportation of students, faculty, and staff.

The Court interpreted 'services' broadly as any commercial activity other than supply of goods, for consideration. The appellant is clearly the supplier of transportation services for consideration.

Regarding the 'recipient', the law distinguishes between the person to whom the service is rendered and the person liable to pay for the service. Where consideration is involved, the person liable to pay is deemed the recipient. Here, the parents of the students pay the transportation fees directly to the appellant, not the school.

The appellant argued that the service is effectively provided to the school because the school regulates, supervises, and controls the transport service, and the payments by parents are made on the school's instruction. However, the Court found that the school neither receives nor pays for the service; the contracts are between the appellant and the parents or students, with the school playing no direct role as service recipient.

Agreements submitted by the appellant were general and did not establish the school as recipient or payer of the service. The transportation permits issued in the school's name were held to be a regulatory requirement and not determinative of service recipient status.

The Court applied the definitions strictly and concluded that the recipient of the service is the parents/students, not the educational institution.

Issue 2: Whether the transportation services are exempt from GST under Notification No. 12/2017-Central Tax (Rate)

The exemption notification at Serial No. 66 provides GST exemption only for services provided (a) by an educational institution to its students, faculty, and staff, or (b) to an educational institution by way of transportation of students, faculty, and staff.

The Court emphasized the strict and unambiguous interpretation required for exemption notifications, holding that the exemption applies only if the service is provided by or to an educational institution.

Since the appellant is neither an educational institution nor providing services to an educational institution (the recipient is parents/students), the exemption does not apply.

The appellant's reliance on a prior Advance Ruling that granted exemption for similar outsourced transport services was distinguished on facts: the prior case lacked contracts or ownership of vehicles, and the ruling was based solely on facts stated by that applicant. The Court held that such ruling was not binding on the present authority and not factually analogous.

Issue 3: Identification of service recipient and consideration

The Court analyzed the definitions under the GST Act and found that the recipient is the person liable to pay consideration for the service. Here, the parents pay the transportation fees directly to the appellant, making them the recipients for GST purposes.

The appellant's argument that the school controls and supervises the service and therefore should be treated as recipient was rejected because the school neither pays nor receives the service contractually.

Issue 4: Binding nature of prior Advance Rulings and applicability of Section 103(1) and (2)

The Court noted that under Section 103(1), Advance Rulings bind only the applicant and the jurisdictional officer in respect of that applicant. Section 103(2) provides that the ruling is binding unless the law, facts, or circumstances change.

The prior Advance Ruling cited by the appellant was not binding on the present authority and was factually distinguishable. The Court thus declined to follow it.

Issue 5: Burden of proof and interpretation of exemption notifications

The Court reiterated the well-established principle that exemption notifications must be strictly construed and the burden of proving entitlement to exemption lies on the claimant.

The appellant failed to establish that the service was provided by or to an educational institution within the meaning of the exemption notification.

Significant Holdings:

"The recipient of supply of goods or services is the person who is liable to pay the consideration where consideration is involved."

"Services provided by way of transportation of students and staff are exempt from GST only if such services are provided by an educational institution or to an educational institution."

"The mere fact that the transportation permit is issued in the name of the educational institution or that the school supervises the transportation does not make the school the recipient of the service."

"Exemption notifications are to be interpreted strictly and the burden of proving entitlement to exemption lies on the person claiming it."

"Advance Rulings are binding only on the applicant and the jurisdictional officer in respect of that applicant and are not binding on other parties or authorities."

Final determinations:

1. The transportation services provided by the appellant to students and staff are not services provided to the educational institution within the meaning of the exemption notification.

2. The services provided by the appellant are taxable and not exempt under Serial No. 66 of Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017 or any other provision of the GST Act.

3. The Advance Ruling passed by the Authority for Advance Ruling is upheld, and the appeal is dismissed.

---