Service tax on Educational Institution

[subhash jain]

Recently the service tax department is asking us to pay service tax on hostel fee received by the school during the period 1.4.2013 to 10.07.2014 by referring to the Notification where the word 'Provided By: is replaced to 'Provided to' on account Auxiliary Education Services.

They are taking the benefit of lacuna in the notification no. 3/2013-ST dated 1.3.2013 (W.e.f. 1.4.2013) where only services provided TO educational institution in relation to education remained exempted by way of auxiliary educational services.

Sir, please guide in this matter.

Thanks in Advance.

 

[DR.MARIAPPAN GOVINDARAJAN]

The interpretation of the Department may be correct when analyzing the entry No.9 relating to exemption to Educational Services.

[Ganeshan Kalyani]

9. Services provided,-

(a) by an educational institution to its students, faculty and staff;

(b) to an educational institution, by way of,-

(i) transportation of students, faculty and staff;

(ii) catering, including any mid-day meals scheme sponsored by the Government;

(iii) security or cleaning or house-keeping services performed in such educational institution;

(iv) services relating to admission to, or conduct of examination by, such institution; ]

Provided that nothing contained in clause (b) of this entry shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent; ]

[Ganeshan Kalyani]

Reproduced the relevant point from the notification for reference.

AI Summary

Service tax on hostel fees: change from 'provided by' to 'provided to' narrows auxiliary education exemption. The tax department asserts that replacement of 'provided by' with 'provided to' in Notification No. 3/2013 ST narrowed the auxiliary educational services exemption, so that only services provided to educational institutions remain exempt, potentially excluding services (including hostel fees) provided by educational institutions during 1.4.2013-10.07.2014; Entry 9 and its proviso limiting the exemption to institutions up to higher secondary are relied upon in that interpretation.