GST payable on skill training fees; no exemption under Notification 12/2017-CT, ITC allowed subject to Section 16

AAR held that the applicant's share of fees received from skill training partners and from its own institutes is liable to GST and does not qualify for exemption under Notification No. 12/2017-CT (Rate). Exemption under Entry 69 was denied as the outsourced training institutes were not shown to be NSDC/SSC approved, nor were the courses linked to NSDC/NSQF-aligned schemes. Exemption under Entry 66 was refused as the applicant's institutes did not qualify as "educational institutions," and Entry 4 was inapplicable. On ITC, AAR declined a conclusive ruling due to lack of factual details but clarified that ITC is not barred merely because inputs are funded by government grants, provided Section 16 conditions are satisfied.

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1. ISSUES PRESENTED AND CONSIDERED

1.1. Whether the share of fee received from skill training partners is exempt from GST under Notification No. 12/2017-Central Tax (Rate), particularly Entries 66, 69, 4 and 5, or constitutes a taxable supply.

1.2. Whether the fee collected directly from students by the applicant's own skill training institutes is exempt from GST under Notification No. 12/2017-Central Tax (Rate), particularly Entries 66 and 69, or is liable to GST.

1.3. Whether the applicant qualifies as an "educational institution", an NSDC/NCVET-approved body, or a "governmental authority" for purposes of claiming the above exemptions.

1.4. Whether exemption can be claimed merely because the applicant or its initiatives (e.g. IIIC, PMKVY/SANKALP schemes) are otherwise covered under separate rulings or schemes, when the services in question are revenue-shares/affiliation charges and not direct training services.

1.5. Whether Input Tax Credit (ITC) is available on inputs/services procured out of Government grants used in relation to activities generating taxable income, and whether the source of funds affects ITC eligibility under Section 16 of the CGST Act.

2. ISSUE-WISE DETAILED ANALYSIS

2.1. GST exemption on share of fee received from skill training partners

2.1.1. Legal framework

(a) Notification No. 12/2017-Central Tax (Rate), Entry 69 (as successively amended) exempts services provided by specified entities (NSDC, NCVET, NCVET-recognised awarding/assessment bodies, and NSDC/SSC-approved training partners) in relation to: (i) National Skill Development Programme or other NSDC schemes; (ii) vocational skill courses under National Skill Certification and Monetary Reward Scheme; or (iii) NSQF-aligned qualifications/skills approved by NCVET.

(b) Entry 66 exempts services provided by an "educational institution" by way of education as part of curriculum for obtaining a qualification recognized by law.

2.1.2. Precedent treatment

(a) Reliance was placed on Advance Ruling No. KER/126/2021, which held that IIIC was exempt as an "educational institution" under Entry 66, but only in respect of specific courses that led to recognized qualifications; no finding was made there on revenue share received by the applicant.

(b) Decisions in Nxtwave Disruptive Technologies Pvt. Ltd. (AAR Telangana) and Scaler/InterviewBit (AAR Karnataka) were referred to hold that exemption under Entry 69 does not extend to subcontracted/affiliated entities which are not themselves NSDC-approved training partners.

2.1.3. Interpretation and reasoning

(a) Entry 69 is to be construed strictly: the phrase "services provided by" confines the exemption to services directly provided by the specified entities, not to all entities in the broader ecosystem or to downstream/subcontracted entities.

(b) The applicant claimed affiliation as NSDC training partner and status as State Skill Development Mission, but training delivery is substantially through other institutes/skill partners whose independent approval under NSDC/SSC/NCVET was not established with evidence.

(c) The applicant did not demonstrate that the services rendered by outsourced partners, from which the applicant derives a share of fee, are:

  (i) themselves provided by NSDC/SSC/NCVET recognised entities; and

  (ii) "in relation to" NSDP, other NSDC schemes, National Skill Certification and Monetary Reward Scheme, or NSQF-aligned qualifications backed by NCVET-approved qualification packages.

(d) The share of fee received by the applicant from these partners was not shown to be consideration for direct training supplied by the applicant to the students under any notified scheme. Instead, in the absence of contrary evidence, it was presumed to be consideration for services such as affiliation, academic oversight, curriculum support, infrastructure and administrative coordination rendered to the partner institutes.

(e) Such services to partners are distinct taxable supplies and are not covered by Entries 66 or 69 merely because the partner or some courses may be in the skill-development domain.

2.1.4. Ratio vs. obiter

(a) Ratio: Exemption under Entry 69 is available only where the applicant, as the service provider, is a specified NSDC/NCVET entity and the service is directly and demonstrably in relation to a specified scheme/NSQF-approved qualification. Revenue shares/affiliation-like receipts from unapproved or unproven partners do not qualify.

(b) Obiter: General discussion on the evolution of Entry 69 (NSDC-centric to NCVET-focused and subsequent restoration of NSDC partners) and CBIC's compassionate approach for the interim period is descriptive and does not determine the specific taxability of the applicant's receipts.

2.1.5. Conclusion

(a) The share of fee received by the applicant from its skill training partners does not qualify for exemption under Entries 66 or 69 of Notification No. 12/2017-Central Tax (Rate).

(b) Such receipts constitute consideration for taxable services and are liable to GST.

2.2. GST exemption on fee collected from students of the applicant's own training institutes

2.2.1. Legal framework

(a) Entry 69, as summarised above, requires: (i) the provider to be NSDC/NCVET specified; and (ii) training to be in relation to notified programmes or NSQF-aligned qualifications with NCVET-approved qualification packages.

(b) Entry 66 requires the provider to qualify as an "educational institution" imparting education as part of a curriculum for obtaining a qualification recognized by law.

2.2.2. Precedent treatment

(a) Earlier ruling in respect of IIIC treated IIIC (not the present applicant per se) as an "educational institution" only for certain courses that culminate in legally recognized qualifications; exemption was confined correspondingly.

(b) That ruling did not examine fee collected or shared by the applicant itself, nor did it grant blanket exemption to all skill-related services of entities within the same administrative framework.

2.2.3. Interpretation and reasoning: Entry 69

(a) The applicant produced an MoU with NSDC, stating that programmes at its Centres of Excellence will "align to NSQF" and that assessment/certification will be by NSDC-approved Sector Skill Councils.

(b) However, mere intended or generic alignment with NSQF was held insufficient; Entry 69 specifically requires that the training be "in relation to" an NSQF-aligned qualification/skill in respect of which NCVET has approved a qualification package.

(c) The applicant did not furnish any NCVET approval order or documents proving that its courses are linked to NCVET-approved qualification packages.

(d) The applicant's assertion that it is recognized as an awarding and assessing body by NCVET was not supported by any final recognition order; on enquiry, it was admitted that only an application was pending.

(e) In absence of such conclusive recognition or NCVET-backed qualification packages, the statutory conditions of Entry 69 were held not satisfied.

2.2.4. Interpretation and reasoning: Entry 66

(a) To be covered as an "educational institution" under clause (y) of paragraph 2, the courses must be part of a curriculum for a qualification recognized by law.

(b) The applicant's courses were described as vocational, but no evidence was furnished to show that they form part of any curriculum approved by a statutory authority or that resulting qualifications are recognized by law or by the State Government.

(c) Accordingly, the applicant's own institutes do not meet the definition of "educational institution" for the purposes of Entry 66.

2.2.5. Ratio vs. obiter

(a) Ratio: Absent proof of NCVET recognition and NCVET-approved qualification packages, or proof that the courses lead to legally recognized qualifications, the applicant's direct training services do not qualify under Entries 69 or 66 and are taxable.

(b) Obiter: Reference to future/pending NCVET applications is incidental and does not affect current taxability.

2.2.6. Conclusion

(a) The applicant has not established that its own training institutes' courses fall under any programme/qualification covered by Notification No. 12/2017-Central Tax (Rate).

(b) Accordingly, fees collected from students of the applicant's own training institutes are liable to GST.

2.3. Applicant's status as "governmental authority" and claim under Entries 4 and 5

2.3.1. Legal framework

(a) Entries 4 and 5 of Notification No. 12/2017-Central Tax (Rate) provide exemption for services provided to or by Central Government, State Government, Union Territory, local authority, or "governmental authority" by way of activities in relation to functions entrusted under Articles 243G and 243W of the Constitution.

2.3.2. Interpretation and reasoning

(a) The applicant, a wholly Government-owned Section 8/Section 25 company and State Skill Development Mission, argued that it is a governmental authority and that its activities relate to vocational training (Entry 17 of Eleventh Schedule) and therefore to functions under Article 243G; and further that its services fall within promotion of educational aspects under Article 243W.

(b) The Tribunal examined the Kerala Municipality Act to discern functions entrusted to municipalities under Article 243W; while "promotion of cultural, educational and aesthetic aspects" is entrusted, the actual imparting of education as such is not a direct municipal function.

(c) On that basis, services of the applicant in imparting skill training/education were not held to fall within the scope of functions exempted under Sl. No. 4 of Notification No. 12/2017-Central Tax (Rate).

2.3.3. Ratio vs. obiter

(a) Ratio: Even assuming arguendo the applicant's governmental authority-like status, the specific services in issue do not correspond to functions entrusted to municipalities under Article 243W; hence Entries 4 and 5 do not grant exemption.

(b) Obiter: Broader interpretative comments on "any other body" in the definition of governmental authority and references to constitutional entries are incidental and not determinative.

2.3.4. Conclusion

(a) Exemption under Entries 4 and 5 is not available to the applicant's services, either towards training partners or to students.

2.4. Availability of Input Tax Credit (ITC) where expenditure is funded by Government grants

2.4.1. Legal framework

(a) Section 16 of the CGST Act, 2017 permits a registered person to avail ITC on input goods/services used or intended to be used in the course or furtherance of business, subject to specified conditions.

(b) GST law does not distinguish ITC eligibility based on source of funds (internal accruals, loans, grants, etc.).

2.4.2. Interpretation and reasoning

(a) The Tribunal clarified that the mere fact that the inputs are procured from Government grants does not, by itself, curtail ITC, provided the inputs are used for making taxable outward supplies and all conditions in Section 16 are met.

(b) Grants from Government are generally not consideration for supply unless there is a specific contractual supply obligation in return; hence, receipt of grants, per se, does not determine output tax liability but may be relevant in understanding the nature of activities they support.

(c) In the instant case, the applicant did not provide sufficient factual details on:

  (i) the specific goods and services procured from grant funds;

  (ii) their actual use or nexus with the identified taxable supplies (services to partners and to students); and

  (iii) precise nature of taxable services rendered to partners.

(d) Because an advance ruling demands concrete facts, the Authority considered itself unable to give a conclusive, transaction-specific ruling on ITC entitlement in the absence of such details.

2.4.3. Ratio vs. obiter

(a) Ratio: Under GST law there is no bar on availing ITC solely because expenditure is funded by Government grants; ITC depends on satisfaction of Section 16 conditions and linkage to taxable outward supplies.

(b) Obiter: General observations that grants are not ordinarily consideration for supply are contextual but not dispositive of any specific transaction in the present case.

2.4.4. Conclusion

(a) No conclusive, fact-specific ruling on ITC entitlement can be issued due to lack of detailed information on inputs and their use.

(b) It is, however, clarified that the source of funds (including Government grants) does not, in principle, affect ITC eligibility if statutory conditions under Section 16 are otherwise complied with and the inputs relate to taxable supplies.

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