Category - Transportation facility provided to the students

[Kewal Trehan]

An Educational institutional institution having its network of schools/units all over India is a registered society and also registered u/s 12A of the Income Tax Act, 1961 and thus eligible for exemption u/s 11/12. The Society is also approved u/s 10(23C)vi  of the Income Tax Act, 1961. The Society while carrying out its educational activities is also plying its own fleet of school buses for transporation of students to and fro Resiedence/School. Recently from the Service Tax Commissionarate in the state of U.p. & M.P. the branches/units of the Society have received notices asking the Society to deposit service tax on the transportation charges/fee received from the students by the Society alleging that such charging of transportation fee falls under the ambit of 'Tour and Operators' thus liable to service tax. The Society has rebutted the claim on the grounds that as it is an educational/charitable institution only and and plying of school buses for transporation of buses is only supplimentary to the carrying out of the main educational activities only and the society is not in the business of 'Tour & Operators', therefore, the society is not exigible to service tax liability under this category. But the authorities are not ready to subscribe to the view of the Society. Please advice, whether service tax is leviable or not under aforesaid circumstances. Please support your advice with relevant case laws/circulars/notifications etc. if any. Thanks.

[Surender Gupta]

The issue mentioned in your query is controversial issue and pending with the judicial authorities. But in the meantime, I am of the opinion that this service would not be liable to service tax under the category of tour operator services.

AI Summary

Educational Society Challenges Service Tax on School Transportation Fees, Citing Exemption Under Income Tax Act and Judicial Review An educational society with a network of schools across India, registered under the Income Tax Act for exemptions, operates school buses for student transportation. The society received notices from the Service Tax Commissionerates in Uttar Pradesh and Madhya Pradesh demanding service tax on transportation fees, categorizing them under 'Tour and Operators.' The society argues that the transportation is supplementary to its educational activities and not a tour operation business, thus not subject to service tax. A respondent opined that the service should not be liable to service tax under the tour operator category, noting the issue is under judicial review.