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The ambiguous drafting of a legal provision defeats the purpose of a law. It is the job of the law makers to address the concerns of people at large and remove air of uncertainty over its interpretations. The Finance Minister, in his maiden budget speech has said that "certain changes are proposed for bringing about greater clarity and for reducing litigation".  Certain changes in respect of applicability of service tax on educational institutes have been made in the mega exemption notification, which are in force from 11.07.2014. Since the introduction of the Negative list based Service Tax, various doubts have arisen in respect of applicability of services provided to or by an educational institute.

Earlier services provided to an educational institution in respect of education exempt from Service Tax by way of auxiliary education service and renting of immovable property service were exempt. The term "Auxiliary service" was defined. As per the definition various services such as any services relating to imparting any skill, knowledge, education or development of course content or any other knowledge – enhancement activity, any other services which educational institutions ordinarily carry out themselves but may obtain as outsourced services from any other person, services relating to admission to such institution, conduct of examination, catering for the students under any mid-day meals scheme sponsored by Government, or transportation of students, faculty or staff of such institution were exempted.

Many doubts were raised as to the literal interpretation of the term "Auxiliary education service" by the various educational institutes across the country. The Government did came out with the Circular clarifying the scope of the exemption but the circular was even more vague. The language of the circular had drawn a battle between the service providers and the educational intuitions as later refused to pay service tax citing the circular leaving the former in jittery.

Finally the dust has settled and the Government has clarified scope of the exempting in respect of services related to educational institutions. The Government vide budget notifications has clarified that exemptions is limited to, Services provided by an educational institution to its students, faculty and staff; and services provided to educational institution by way of:-

(i) transportation of students, faculty and staff;

(ii) catering, including any mid-day meals scheme sponsored by the Government;

(iii) security or cleaning or house-keeping services performed in such educational institution;

(iv) services relating to admission to, or conduct of examination by, such institution.

The Government has specified the above mentioned services which shall enjoy exemption if provided to an educational institution, bringing all other services under the net of service tax. The government also silently done away the exemption in respect of renting of immovable property service provided to an educational institution.

Earlier in this column only, the writer has advocated the need of the education security bill, as right to proper food is one of the basic requirements and a fundamental right of each and every citizen, so is the Right to Education. A healthy nation is one which is physically and mentally healthy. The education sector has always remained neglected in our Country. It is the time that it should be made priority sector and a blanket exemption should be given to all areas of education.

With Warm Regards 

Monish Bhalla


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Category Service Tax, Other Articles by - MONISH BHALLA 



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