Input Credit Utilisation for set off of taxable services provided by educational institutions

[Rajat Singhania]

Dear Panel,

An educational institution registered under Section 12AA receives rent on building provided by it for accomodating its students. The receipt of rent is a taxable event and hence taxable under GST. My question is whether the said Institution can avail any ITC in its account to set off the liabilty for payment of GST on rent.

[Nitika Aggarwal]

From whom this educational institution gets the rent?

[Alkesh Jani]

Sir,

The ITC is governed by Chapter-V of CGST Act. The Section 16(1) of CGST Act,2017 is as under :-

““16. (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person”.

From above, if you are registered under GST Act, you are eligible for ITC, subject to conditions and restriction. Moreover, Section 49 (4) of CGST Act, 2017 reads as under:-

“(4) The amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions and within such time as may be prescribed”

On conjoint reading, I am of the view that, you can utilize the ITC for output tax, i.e. other than tax payable under RCM.

Our experts may correct me if mistaken.

Thanks

[Rajat Singhania]

Hi Nitika,

The rent is received from a pvt. ltd. company

[Rajat Singhania]

Hi Alkesh,

I had the same view until I read an article issued by CBEC which mentions that, for educational institutions, " Regarding, input services, it may be noted that where output services are exempted, the Educational institutions may not be able to avail credit of tax paid on the input side.''

The question that comes to mind here is, for Educational Institutions, where the primary activity is education services provided to students (which are exempt), how to distinguish the input received as one coming for exempt services and the other for taxable services.

[Nitika Aggarwal]

As per section 16 of CGST Act, 2017, the registered person is eligible to take the input of goods or services which are used for providing taxable output services subject to the provisions of section 17(5) of CGST Act, 2017 (i.e. block credit). Thus, as per the facts available to us, educational institution is eligible to take the ITC of goods or services which are used for the provision of taxable output services i.e. renting of commercial building.

For the sake of your knowledge, it is essential to highlight that renting of residential dwelling is outside the purview of CGST Act, 2017 by way of Notification No. 12/2017-Central Tax (rate). Since, you are not covered under the ambit of aforesaid notification, thus you are not eligible for the aforementioned exemption.

Further, the amount of ITC available in the electronic ledger of the registered person shall be utilized in accordance with the provisions of section 49(5) of CGST Act, 2017.

CA Nitika Aggarwal

9953157961

[Alkesh Jani]

Sir, Please refer Rule 42 of CGST Rule, 2017 for your query.

[YAGAY andSUN]

We endorse the very view of the experts.

[Alkesh Jani]

Sir, I regret for typing error, Please read as “Please refer to Rule 42 of CGST Rules,2017.

Thanks

AI Summary

Educational Institution Seeks to Use ITC for GST on Rent from Private Company, Citing CGST Act Sections 16(1) & 49(4) An educational institution registered under Section 12AA inquires about utilizing Input Tax Credit (ITC) to offset GST liabilities on rent received from a private company. The discussion references Section 16(1) and Section 49(4) of the CGST Act, 2017, which allow ITC for business-related goods or services, subject to conditions. A concern is raised about differentiating inputs for exempt and taxable services, as educational services are generally exempt. The consensus suggests ITC can be claimed for taxable services like renting commercial buildings, referencing Rule 42 of CGST Rules, 2017, while noting exemptions for residential renting.