GST on Educational Services

In India providing education is considered as a social activity and this compels the government to relief educational institution from taxes. The government is constitutionally required to provide basic elementary education to every child.

Educational institution means any institute providing services by way of:

1. Pre-school education(Playschool) and education up to higher secondary school or equivalent;
2. Education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force like ICAI giving CA’s degree.
3. Education as a part of an approved vocational education course like ITI

Under GST, service provided By/To the following are exempted:

1. By an educational institution to its students, faculty, and staff;
2. To an educational institution providing pre-school education and education up to higher secondary school or equivalent, in the name of ancillary services like (i) transportation of students, faculty and staff; (ii) catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory; (iii) security or cleaning or housekeeping services performed in such educational institution; (iv) services relating to admission to, or conduct of examination by, such institution; up to higher secondary

It is clearly evident that ancillary services provided by private players to education institution other than an institution providing services by way of pre-school education and education up to higher secondary school or an equivalent shall be liable to pay GST. Example- Caterer hired by playschool are exempted from GST but if hired by ICAI he is required to pay GST.

3. Services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programmes, except Executive Development Programme: – (a) two year full time Post Graduate Programmes in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT) conducted by the Indian Institute of Management; (b) fellow programme in Management; (c) five year integrated programme in Management.

Therefore we can conclude that any service by Educational institute other than above will be chargeable to GST @ 18%. Private coaching institute, Institute providing foreign qualification or other unrecognized institution will be required to pay GST.

 GST registration

A supplier of Educational service whose turnover exceeds 20 lakh in a financial year(Rs.10 lakh for North East states) is required to get GST registration within 30 days from the date on which he becomes liable to registration. Exempted turnover will also be considered while calculating the 20/10 lakh limit.

Although exempted supplies are included in the computation of  20 lakh aggregate turnover. However, as per FAQ’s issued by CBEC, Service provider of 100% exempted supplies are not required to get GST registration even if exempted turnover exceed Rs.20 lakh.  Read more about GST registration –Here

Place of Supply of Service

Note: The Place of supply of Educational Services where the location of the supplier of services or the location of the recipient of services is outside India will be the place where the event is actually held.

Rate of GST

Educational services other than the above will be chargeable to GST @ 18% [SGST (9%)+CGST(9%)]

Composition and mixed supply

1. Composite supply a.k.a Natural Bundle

Educational Institutes providing additional Services like providing dwelling units for residence and food etc. to their students, faculty, and staff will be considered as a natural bundle.  In case of natural bundle service, predominant nature of service should be considered. Therefore while determining the tax liability, in this case, the entire consideration for the supply will be exempt.

2. Mixed Supply a.k.a Artificial Bundle

Artificial bundle of service means clubbing of two different services together, only one of which is exempted from GST, then by application of the rule of determination of taxability of a supply which is not bundled in the ordinary course of business, it shall be treated as a mixed supply as per provisions contained in section 2(74) read with section 8 of the CGST Act, 2017. The taxability will be determined by the supply which attracts the highest rate of GST. Example: A college providing dual qualification only one of which is exempted from GST.