Service Tax on the services to and by education institutions

Educational institutions are not spared from service tax. The services provided by the education institution and the services availed by the institutions are subject to service tax with certain exemptions. The specifics of this issue is dealt with in this article. (the law as it stands on October 2014)

Service provided by an educational institution –

All services provided by an educational institution to its students, faculty and staff are exempt from service tax. This means the fee/charges collected towards admission, tuition, examination, digital classroom, transportation, staff quarters, library, extracurricular activities (such as dancing, painting, sports), mess, canteen, hotel, etc are exempt from service tax.

Services provided to an educational institution –

The following four categories of services are exempt from service tax

• Transportation of students, faculty and staff

• Catering including any mid-day meals scheme sponsored by the Government

• Security or cleaning or house-keeping services provided in such educational institution

• Services relating to admission to or conduct of examination by such institution

FAQ

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1. Is renting of immovable property to educational institution subject to service tax?

Yes. It is taxable. The building owner has to charge service tax at 12.36% on the rental value.

2. Is pre-school education exempt from service tax?

Yes. The fee collected by Pre-school, play school, crèche, nursery, primary up to higher secondary education school or equivalent is exempt from service tax

3. Is degree, engineering, medical, university education exempt from service tax?

Yes. Any institution which offers recognized courses, formal education and awards/grants qualifications recognized by law are exempt from service tax.

4. Is vocational training or coaching education exempt from service tax?

Any courses conducted by ITI (Industrial Training Institute) or any other institutes affiliated to National Council of Vocational Training are exempt from service tax

5. Is a private coaching centre offering coaching for competitive exams such as civil services (IAS, IPS), CAT, CLAT, CPT, CET or animation or computer education, exempt from service tax?

No, training or coaching given by private coaching institutes are not exempt from service tax as they are not offering/granting any recognized degree/qualification. So, the tuition/coaching fee is subject to service tax.

6. Are International schools or boarding schools covered under service tax exemption?

Yes. It doesn’t matter whether it is an international school or boarding school, as long as they offer recognized degree or formal education, the tuition fee, boarding fee, etc are exempt from service tax.

7. Is fee collected by education institution from corporates towards sponsorships or campus placement services subject to service tax?

Yes. Any fee/charges/rent collected from the corporates is subject to service tax.

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