GST Update No 265 on taxability of educational board conducting examination

With the advent of paradigm shift in indirect taxation sector, the question as regards to applicability of GST on education sector is a matter of grave concern. Following the passage of time, commercialisation in educational sector has increased tremendously. The Government has exempted the services provided to and by educational institutions vide Exemption Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. On similar lines, one case was reported before Karnataka AAR in the case of M/S KARNATAKA SECONDARY EDUCATION EXAMINATION BOARD. The decision imparted is subject matter of our present update.

The applicant is an independent board engaged in holding and conducting examinations. The advance ruling was sought in respect of following questions:
1.   Whether the applicant is an “educational institution” and ought to be treated as such for the purpose of GST applicability?
2.   Whether the activity of printing question papers, admit cards, answer sheets, fail marks cards etc. be treated as supply of service. If so, whether it is ancillary service be covered under Exemption Notification and thereby attract NIL rate of tax?
3.   Whether the services of scanning of notebooks, hiring of light vehicles and heavy vehicles for transportation of educational material, obtaining security guards and house keeping services etc. is exempted from GST being covered by Notification No. 12/2017 dated 28.06.2017.

The applicant analysed and submitted definition of “educational institution” as given in the Exemption Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 wherein it was concluded that the legislative intent clearly specifies that educational institution is one which provides services facilitating in obtaining qualification recognised under any law for the time being in force. Therefore, they are educational institution. Reliance in this respect was placed on various decisions of High Courts and Supreme Court such as Gujarat High Court in the case of M/S SAHITYA MUDRANALAYA PRIVATE LIMITED V/S ADDITIONAL DIRECTOR, GENERAL. It was further argued that the Legislature meant the entire process of preparation of curriculum to holding of examination leading to obtaining qualification in recognised law is covered. Therefore, the school board would clearly fall under the definition of “educational institution”. Furthermore, it was submitted that incidental services provided to Board or on behalf of Board can be indisputably classified under services and not goods. Therefore, they are exempted vide S. No. 66 of the Exemption notification.

The AAR analysed and held that the Karnataka Board is an educational institution for the purpose of providing service by way of conduct of examination to the students. Further, as far as printing activity is concerned, the applicant is recipient of service and the printing activities are carried on by third party. However, it was concluded that as per Section 95 of CGST Act, 2017, advance ruling can be sought by the applicant who proposes or undertakes the activity and not by recipient of supply. Therefore, the Authority for Advance Ruling refrained itself from imparting any judgement on the said point.

There have been various advance rulings wherein the advance ruling has refrained from commenting on the issue as the application for advance ruling was filed by the recipient of service rather than the supplier of service. As regards considering education board as “educational institution”, it is pertinent to mention here that CBIC addressed the difficulties faced by industry in this respect and thereby issued a Circular No. 151/07/2021-GST dated 17.06.2021 clarifying that Central and State Education Boards shall be treated as Educational Institution for the limited purpose of providing services by way of conduct of examination to the students. It is high time that the circulars should be followed by departmental authorities so that unwarranted litigation may be avoided.

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GST Update No 265 on taxability of educational board conducting examination

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