TRU has issued a Circular No. 164/15/2012-ST dated August 28, 2012 clarifying certain issues in relation to levy of service tax on certain vocational education/training/ skill development courses (VEC) offered by the Government (Central Government or State Government) or local authority themselves or by an entity independently established by the Government under the law, as a society or any other similar body.
We have summarized the points for your ready reference:-
When a VEC is offered by the Government or a local authority, service tax is not leviable as the said Service is covered under the Negative list under section 66D of the Finance Act, 1994, i.e. not chargeable to service tax. As per Section 66D (a), most services provided by the Central Government or state government or local authorities are not chargeable to service tax except the following:
1. services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government;
2. services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
3. transport of goods or passengers; or
4. support services, other than services covered under clauses (i) to (iii) above, provided to business entities
VEC is excluded from this list of taxable services provided by Government or local authority. Hence, when VEC is provided by Central Government or local authority, it is not chargeable to service tax.
However, when a VEC is offered by an entity independently established by the Government under the law, as a society or any other similar body, service tax treatment has to be determined in a different manner. The Circular clarifies that applicability of service tax is to be determined in terms of sub-clause (ii) or (iii) of clause (l) of section 66D of the Finance Act, 1994.
A. Sub Clause (ii) of clause (l) of section 66D provides that services provided by way of education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force are not chargeable to service tax.
The Circular provides that in the context of VEC, qualification implies a Certificate, Diploma, Degree or any other similar Certificate. The words “recognized by any law” will include such courses as are approved or recognized by any entity established under a central or state law including delegated legislation, for the purpose of granting recognition to any education course including a VEC.
Further Clarification regarding this has been given in the Education Guide dated June 20, 2012 issued by CBEC:
4.12.1 What is the meaning of 'education as a part of curriculum for obtaining a qualification recognized by law'?
It means that only such educational services are in the negative list as are related to delivery of education as 'a part' of the curriculum that has been prescribed for obtaining a qualification prescribed by law. It is important to understand that to be in the negative list the service should be delivered as part of curriculum. Conduct of degree courses by colleges, universities or institutions which lead grant of qualifications recognized by law would be covered. Training given by private coaching institutes would not be covered as such training does not lead to grant of a recognized qualification.
B. Sub Clause (iii) of clause (l) of section 66D provides that services provided by way of education as a part of an approved vocational education course are not chargeable to service tax.
Section 65B (11) of Finance Act, 1994 provides the definition of approved vocational course as-
1. a course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961; or
2. a Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Employment and Training, Union Ministry of Labour and Employment; or
3. a course run by an institute affiliated to the National Skill Development Corporation set up by the Government of India
If the entity independently established by the Government under the law, as a society or any other similar body is providing VEC which is covered under sub clause (ii) or sub clause (iii) of Clause (l) of Section 66D, then it will not be chargeable to service tax. In other cases, service tax will be leviable.
Bimal Jain
FCA, ACS, LLB, B.Com (Hons)
E-mail: bimaljain@hotmail.com
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