In a recent ruling by the Maharashtra Authority for Advance Rulings( AAR) has maintained that the coaching centers are not eligible for exemption under GST and they will continue to pay GST @18% under the GST regime, even in cases where the educational services bear a “Nil” tax for their educational services.
The ruling came when a Mumbai based coaching institute namely the Simple Shukla Tutorials based in Borivali, Maharashtra moved to Maharashtra AAR for seeking GST exemption in coaching service fees. The application was filed with an intent to seek advance ruling and clarify whether the educational services being provided for the entrance exam preparation will come under the ambit of Goods and Services Tax (GST) and whether the fees paid by the students will continue to attract GST.
The applicant namely the Simple Shukla Tutorials is engaged in providing services of teaching to the students of class XI and XII and helps the students to prepare for entrance examinations related to MBBS and engineering preparations and other science-related examinations.
They argued that the coaching centers too are in the nature of educational institutions and hence should be exempt from GST considering the fact that the services given by educational institutions, faculty, and staff are exempted from GST levy.
How are educational Institutions defined under GST?
• Under the GST laws, educational institutions have been defined so as to mean those institutions imparting either pre-school education or up to higher secondary level or those institutions that are part of approved vocational courses.
• The definition also covers those institutions that offer education as a part of a program for obtaining a qualification recognized by any law in India.
The ruling of the AAR Authority:
Therefore, the AAR authority ruled that Simple Shukla Tutorials cannot be covered under the definition of an educational institution as the private institution neither possess any specific curriculum and nor conduct any award or qualification or any qualification recognized by law. Thus, the Simple Shukla Tutorials shall continue to submit GST at the rate of 9 percent under the CGST Act and 9 percent SGST Act of GST.
Under the GST regime, the tax collected is distributed equally between the Centre and the States.
The Central Board of Excise and Customs (CBEC) had also notified that private coaching center or other unrecognized institutions designated as educational institutions shall not be treated as educational institutions under GST and thus are not eligible avail exemptions, as training given by such private coaching institutions shall not be included owing to the fact that such training does not provide a qualification recognized in the education system.
Similarly, the money collected for the purpose of granting accommodation and food services to the students shall not be eligible to get an exemption.
Earlier the AAR authority gave a similar ruling in the case of re. Master Minds classes providing coaching services for the preparation of professional exams like CA and CMA. The AAR authority ruled that the coaching center was not eligible for GST exemption as the coaching center was neither affiliated nor recognized or authorized by professional bodies like ICAI or ICMA for providing coaching and training to the aspirants through their regional councils or branches or other accredited bodies in the harmony of the suggested curriculum.
Earlier, it was decided to keep core education services out from the purview of GST while imposing 18% GST on other educational services with complete admissibility of Input tax credits for such taxable services.
Conclusion:
The ruling has made it clear that the exemption from indirect taxes was neither available under previous tax regime nor would be available under the present GST regime to the private institutions rendering coaching classes for the entrance examination and similar entities.
In the past, private coaching services attracted service tax @15% which are now taxable under GST Act @18% however, it doesn’t mean an increase in the fee amount for students, as these institutions have been allowed higher ITC claims to be passed to the students ultimately and keeping their fee the same.
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