GST Update No 176 on exemption on service provided in relation to ASSET examination

Bringing education sector under the preview of taxation has always been a sensitive issue since beginning as education is seen more as a social activity rather than commercial one. It is constitutional obligation of the government to provide free education and therefore, exemption has been provided in this respect. However, recently an issue was raised before the hon’ble Gujarat High Court in the case of EDUCATIONAL INITIATIVES PVT LTD V/S UNION OF INDIA as to whether conduct of examination by the applicant will be covered under the exemption granted with respect to services provided to the educational institutions. The petitioner filed application before AAR wherein it was held that the benefit of exemption notification is admissible to the petitioner. However, the revenue authorities filed appeal against the said order passed by AAR before Appellate Authority for Advance Ruling wherein the issue was decided against the assessee. Thereafter, aggrieved by the Order passed by the Appellate Authority of Advance Ruling, the present writ petition has been filed before the Rajasthan High Court. The decision imparted in this respect is subject matter of present update. The applicant is a private limited company engaged in products and solutions used in education segments. An advance ruling was sought as to whether the services by it to educational organisation related to ASSET examination is covered under exemption. It is mandatory for the students to give ASSET exams which are being conducted by schools in their own premises and marks are given after due weightage to the students ASSET score in semester and final exams. The exams can be taken either in online or in offline mode. The GAAAR rule out that the said activity is not exempted since services are not provided to the school and school is just a body by which fee is collected from the students, administration cost of which is provided to school. Reliance was placed on the “Flyer” issued by CBIC. CA. PRADEEP JAIN ??www.capradeepjain.com??pradeep@capradeepjain.com??5 The applicant therefore filed a Writ Application contending that GAAAR has erred in its approach without deliberating the difference between “assessment” and “examination”. It is further submitted that if the interpretation of the AAAR is adopted, it shall defeat the fundamental intent of Government to provide exemption to schools and colleges providing education facility. Reliance was placed on Circular No. 151/07/2021-GST dated 17.06.2021 issued by CBIC. Further, reliance was placed on the decision of West Bengal AAR in the case of ASHOK KUMAR BASU 2018(10) TMI, M/S. EDUTEST SOLUTIONS PVT. LTD., GUJARAT AAR (2018 (10) TMI 201) AND M/S. THE BANGALORE PRINTING AND PUBLISHING CO. LTD., KARNATAKA AAR (2019 (11) TMI 157 wherein it was held that service to educational institution includes services relating to conduct of examination such as service of printing question papers is exempt from GST. The Counsel of respondent submitted that AAAR has lawfully and correctly imparted right order. It was argued that the word “relating to” used in the S. No. 66 of the Notification No. 12/2017 dated 28.06.2017 cannot be interpreted in a manner to enlarge the scope of entry to include the ASSET within the scope. The Court held that the term “education” is not defined. Therefore, reference was made to the decision of Apex Court in the case of SOLE TRUSTEE, LOKA SHIKSHANA TRUST VS. CIT, (1976) 1 SCC 254 : AIR 1976 SC 10. It was held that the word education has a wider meaning covering all the matter related to imparting and controlling education. Reliance was further placed on the decision of Supreme Court in the case of K. SHYAM SUNDER (2011) 8 SCC 737 wherein it was held that examination is always considered as a best measure which revolves around education and evaluates the performance of the candidate. In the present case, the applicant is suppling ASSET to various educational institution which are covered under the definition of educational institution. It was stated that two conditions are to be satisfied to be eligible for the exemption. Firstly, the recipient of services should be educational institution and secondly the services should be in the nature of education. Further, it was held that the term “in relation to” has been a matter CA. PRADEEP JAIN ??www.capradeepjain.com??pradeep@capradeepjain.com??6 of interpretation in various courts. Reliance was placed on decision of Apex Court in the case of DOYPACK SYSTEMS (P) LTD VS UOI 1988 (36) ELT 201 SC wherein it was held that the said word carries a wider meaning. It was further held that it is well-settled that even in tax statutes, an exemption provision should be liberally interpreted to achieve the basic objective and intention of the exemption. Therefore, it was held that the services shall be exempt vide Notification No. 12/2017 dated 28.06.2017. The above ruling is a sigh of relief for the taxpayers engaged in providing ancillary educational services. The above subject matter has been prone to litigations since inception as the Courts are flooded with number of cases on the same. To illustrate, in the case of MANAGEMENT & COMPUTER CONSULTANTS, WEST BENGAL AAR, it was held that no GST shall be leviable on services related to conduct of examination for education board. The above decision by Gujarat High Court is having a binding effect on the department. It is high time the authorities should follow these Judicial Pronouncements and avoid taking unreasonable steps resulting into harassment of tax payers.

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GST Update No 176 on exemption on service provided in relation to ASSET examination

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