Query on RCM for the affiliation fee payable to foregin educational institutions

[Ravi Venkatraman]

Dear Experts,

I work for an educational group, based out of Bangalore, which has in its group, 1 International School also, for which affiliation fees are to be paid to Cambridge UK and also one more educational affiliation organisation in Singapore. We have heard that on such affiliation fees paid to those foreign institutes, we are to remit GST to government, under RCM. since the educational services are exempt from GST, we have not registered under GST, is the information that we have to remit RCM on affiliation fees is correct and if so, do we need to register under GST act, only to remit the RCM and keep filing NIL returns, during the rest of the months, when no such affiliation fees are being paid. how shall we proceed.

Request your opinion.

thanks !

[Sadanand Bulbule]

The affiliation fee paid constitutes consideration for services received from a person located in a non-taxable territory, i.e., outside India. These services may include brand recognition, academic consultancy, curriculum support, quality assurance, or technical collaboration. However the nature of exempt educational services are defined at Sl No. 66 of Notification No. 12/2017–CT (Rate).

Any person liable to pay under RCM must take registration under Section 24[iii] of the CGST Act, 2017.

[Shilpi Jain]

It is an interpretative issue and no settled law in case of a foreign affiliation.

Considering the policy of the Govt. related to education, you should consider making a representation to the Govt./GST council to issue a clarification that these services should also be exempt from GST in the way that the domestic affiliations are also exempt.

Though the sad part is that the Govt. considers that the domestic affiliations are also liable to GST in spite of the favourable HC decisions in this regard.

 

[Shilpi Jain]

One way to be compliant under the law and to avoid future disputes is that take registration and pay under protest and apply for refund (if the amounts are huge).

Else, if the cost can be borne, better to pay off and forget since the cost of litigation would be huge as it has to travel to the Courts to settle.

AI Summary

Reverse Charge Mechanism may apply to foreign affiliation fees, requiring GST registration and remittance under RCM. The reverse charge mechanism may apply to affiliation fees paid to foreign education bodies because such fees are consideration for services from a person in a non taxable territory. Exemption for educational services appears at Sl No. 66 of Notification No. 12/2017 CT (Rate), but its application to cross border affiliations is unsettled. A person liable under reverse charge must obtain GST registration; practitioners recommend seeking governmental clarification, registering and paying under protest and applying for refund, or paying to avoid litigation.