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

Student transportation by educational institutions not taxable as tour operator services when ancillary to core educational activities.
Whether charges for transporting students by a tax-exempt educational society's own fleet are taxable as tour operator services is disputed; the society argues that student transportation is incidental to core educational activities and therefore should not attract service tax, while tax authorities treat it as tour operator services. The issue is controversial and pending adjudication, though an advisory opinion favors non taxability when the service is ancillary to education.