Is Service Tax Liable on Following Heads

[Paresh Virdikar]

Hello,

We are Registered Trust and we are tied up with YCMOU for Earn and learn Scheme. We deploy our student in various organization. The Organization Pays a monthly Stipend to us as agreed which is in turn paid to the Students, the other charges taken by us is (Educational charges which is Paid to University, Administrative charges and Indirect Cost which is Insurance, Canteen,Shoes, Apron).

My question is Service Tax Applicable for above thing and if yes then on what amount should we deduct the Service Tax and how much percent.

Sr.no	Particulars	Amount
1	Reimbursement of Stipend	7000
2	Educational Charges	1200
3	Administrative cost	1200
4	Indirect Cost	350
		9750

As per my Knowledge the ST should be on Administrative charges, if ST is not applicable on the other heads then do we have any notification on this.

Regards,

Paresh Virdikar

[KASTURI SETHI]

No exemption from leviability of Service Tax is available to any Trust or Charitable Organization /institution. Kindly peruse Para No.2 of Board's Circular No.107/01/2009-ST dated 28.1.2009 which is extracted below:-

2. Commercial Nature of Institute

The first issue arises from the very name i.e. Commercial ‘training or coaching center’. Many service providers argue that the word commercial appearing in the aforementioned phrase, suggests that to fall under this definition, the establishment or the institute must be commercial (i.e. having profit motive) in nature. It is argued that institutes which are run by charitable trusts or on no-profit basis would not fall within the phrase ‘commercial training or coaching center’ and none of their activities would fall under the taxable service. This argument is clearly erroneous. As the phrase ‘commercial training or coaching center’ has been defined in a statute, there is no scope to add or delete words while interpreting the same. The definition commercial training or coaching center has no mention that such institute must have ‘commercial’ (i.e. profit making) intent or motive. Therefore, there is no reason to give a restricted meaning to the phrase. Secondly, service tax, unlike direct taxes, is chargeable on the gross amount received towards the service charges, irrespective of whether the venture is ‘profit making, loss making or charity oriented’ in its motive or its outcome. The word “Commercial” used in the phrase is with reference to the activity of training or coaching and not to the nature or activity of the institute providing the training or coaching. Thus, services provided by all institutes or establishments, which fulfills the requirements of definition, are leviable to service tax.

If any Trust receives consideration in lieu of service provided to any institution/organization, the activity is liable to Service Tax. Your activity is covered under Section 67 (3) of the Finance Act and Definition of 'Consideration' Explanation (a) to Section 67 (w.e.f. 14.5.2015) which are extracted below r:-

(3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service.

Explanation. - For the purposes of this section, -

(a) [“consideration” includes -

(i) any amount that is payable for the taxable services provided or to be provided;

(ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed;

In view of the above, all the amounts received by you are taxable irrespective of the fact you paid some amount out of this to University. You have supplied manpower to organization and received consideration from that institution.This service is covered under Reverse Charge Mechanism if provided to body corporate (Notification No.30/12-ST dated 20.6.2012 as amended vide Notification No.7/15-ST dated 1.3.15 at serial no.8) 100% Service Tax is to be paid by service recipient i.e. Organization where persons deployed.

As per legal dictionary meaning of body corporate : A legal entity (such as an association, company, person, government, government agency, or institution) identified by a particular name. Also called corporation, corporate body or corporate entity.

I think your Service Receiver qualifies the definition of body corporate. I am not aware of terms and conditions of contract, if any, executed with your service receiver.

YCMOU stands for Yashwantrao Chavan Maharashtra Open University. Am I right ?

This is my opinion and observation/interpretation. I also expect views from other experts.

[Ganeshan Kalyani]

Yes I agree with Kasturi Sir's reply.

AI Summary

Service tax applicability on supplied manpower: recipient liable under reverse charge where recipient is a body corporate. Services by the trust placing students and charging stipend, educational, administrative and indirect costs are taxable as gross consideration, and if the service recipient is a body corporate the tax is payable by the recipient under the Reverse Charge Mechanism.