Sale of study material by coaching centre

[satbir singhwahi]

Sale of study material by coaching centre , vat is paid . Now service tax audit team asking for service tax .Whether service tax applicable when vat already paid?

[Guest]

If VAT paid on actual basis and proper documentary evidence exist, exemption can be claimed towards value of goods as held in the case of CEREBRAL LEARNING SOLUTIONS PVT. LTD.

 

[RAMASWAMY KRISHNAIYER]

Sir,Since the question is whether there is a sale of study materials, dominant intention test will apply. Since main intention is only to impart education transaction will only be liable to service tax. Supply of study materials is only incidental. CA. K. Ramaswamy

[Rajagopalan Ranganathan]

Sir,

      Please see CESTAT's Stay Order No. S/685/2007-WZB/C-I/(C.S.T.B.), dated 11-10-2007  in which it is held that "we are satisfied that prima facie when the language of the notification does not restrict exemption only to standard text book sold, the notification cannot be whittled down by the circular."

   In the above case the department had denied exemption contained in Notification No.12/2003-S.T. dated 20-6-2003 as amended by Notification 12/2004-S.T. dated 10-9-2004 to study material sold/supplied by the applicant to their students on the ground that the study material supplied are not standard text book following the Circular No. 59/8/2003, dated 20-6-2003 issued by CBEC.

            In this circular CBEC had clarified in para 2.9.1 that in case of authorized service stations, maintenance or repair services, commissioning and installation services and photography services it has been provided in the law that the cost of goods and material shall not form part of the value to be subjected to service tax, if evidence (like sale invoice/bill) shows that these goods were sold. Such dispensation has, however, not been provided for other services like commercialcoaching and training centers, telecom services. In this regard, a general exemption under Notification No. 12/2003-Service Tax, dated 20th June, 2003 has been issued exempting that part of the value of all taxable services from service tax, which represents the cost of goods or material sold by the service provider to the receiver of such services during the course of provision of the taxable services. This exemption would be available only in cases where the sale of such goods is evidenced and the sale value is quantified and shown separately in the invoice. It is also clarified that in case of commercial training and coaching institutes, the exclusion shall apply only to the sale value of standard textbooks, which are priced. Any study material or written text provided by such institute as a part of service which does not satisfy the above criteria will be subjected to service tax.

     In view of the above you may contest the audit objection and seek a speaking order from the authorities so that you can agitate the matter in appeal.  Please do not make any payment. due the insistence of the department.

AI Summary

Exemption for sale of goods during services may apply when sale is separately invoiced and evidenced, limiting service tax. Exclusion from service tax for goods sold during provision of services requires that the sale be real, VAT paid on actual basis, and the sale value be evidenced and shown separately in the invoice. The dominant intention test treats materials incidental to imparting education as part of the taxable service, while the statutory exclusion has been applied narrowly for coaching institutes to priced standard textbooks; other study material supplied as part of the service remains liable unless separately invoiced and quantified.