No Service Tax on sale of coaching material

Last updated: 23 May 2023

Save Share

Quick Summary

The CESTAT Kolkata has ruled that income generated from selling study materials is not a taxable service under the Finance Act, 1994. The tribunal found that the sale of books is a sale of goods, distinct from coaching services, and therefore not subject to service tax. This decision allows for the appeal of a previous order that had confirmed a service tax demand and penalty.

Court :
CESTAT Kolkata

Brief :
The CESTAT Kolkata in the matter of M/s. Kanhaiya Singh Vision Classes Private Limited v. Commissioner of CGST & CX, Patna-I Commissionerate [Service Tax Appeal No.75767 of 2021 dated May 18, 2023] has held that the amount collected by selling study material is not a taxable service under the Finance Act, 1994, hence, no service tax leviable on sale of coaching material.

Citation :
Service Tax Appeal No.75767 of 2021 dated May 18, 2023

The CESTAT Kolkata in the matter of M/s. Kanhaiya Singh Vision Classes Private Limited v. Commissioner of CGST & CX, Patna-I Commissionerate [Service Tax Appeal No.75767 of 2021 dated May 18, 2023] has held that the amount collected by selling study material is not a taxable service under the Finance Act, 1994, hence, no service tax leviable on sale of coaching material.

Facts

M/s. Kanhaiya Singh Vision Classes Pvt. Ltd. ("the Appellant") is engaged in providing coaching services to the aspiring students for qualifying the competitive entrance examinations into engineering/medical institutes and also sells study material.

The Appellant was issued with a Show Cause Notice dated September 24, 2018 ("the SCN") alleging short payment of service tax on coaching services by artificially bifurcating the consideration received towards coaching services in other categories such as Income from sale of bag, sale of Identity card, sale of prospectus and sale of books.

The Appellant had replied to the SCN by stating that the value of sale of books cannot be included in the value of coaching services as the same is the sale of goods and cannot be taxed as per the Notification No. 12/2003-ST dated June 20, 2003.

The Adjudicating authority vide an Order dated March 17, 2021 confirmed the demand of Service tax with an equivalent penalty.

Issue

Whether income from sale of books must be added in the consideration for coaching services?

Held

The CESTAT, Kolkata in Service Tax Appeal No.75767 of 2021held as under are:

The Tribunal in various decisions held that the value of books cannot be included in the consideration for coaching services.
Relied upon the judgement of M/s Chate Coaching Classes Pvt. Ltd. 2013 (29) S.T.R 138 "the amount collected by the Appellant selling of study material is not taxable service under the Finance Act, 1994".
The value of book sales is separately identifiable from the Appellant audited financial statements, and there are documents to show that such sales were made not only to students but also to third parties.
Hence, the appeal is allowed and held that no service tax leviable on sale of coaching material.

FAQ :

No, the CESTAT has held that the amount collected from selling study material is not a taxable service and therefore no service tax is leviable on the sale of coaching material.

The case involved a coaching centre that was accused of short payment of service tax by including income from the sale of study materials as part of their coaching services.

The tribunal ruled that the sale of books is a sale of goods, which is separate from the coaching service provided. The value of book sales was also separately identifiable in the company's financial statements.

No, the judgement noted that documents showed the study materials were sold not only to students but also to third parties.