Private education training firms subject to GST, rules Kerala AAR

Private training or coaching companies would draw the goods and services tax (GST) for they are not education institutions as the government has defined under the indirect tax regime, according to the Kerala-based authority for advance rulings (AAR).

Experts said 18 per cent GST would continue to be imposed on these companies–BYJU’s, Vedantu, and Udemy are some examples–after the AAR recent ruling. They said these companies whether they offer education online or offline would be subject to GST.

The AAR ruled that Ernakulam-based Tutor Comp Infotech India is not exempt from GST for its services. Note that education is exempt from service under GST.

Tutor Comp Infotech, which is based in the Infopark special economic zone in Kochi, offers online education services. It had asked AAR whether services offered to individual students one-to-one and providing education up to higher secondary school are exempt from GST.

The company said service to individual students is liable for a NIL rate as it is provided under a central government notification issued in 2017. The notification described an educational institution as one providing services by way of pre-school education and education up to higher secondary school or equivalent; education as part of the curriculum for obtaining a qualification recognised by any law in force; education as a part of an approved vocational education course.

The company referred to various cases to claim that it is an educational institution.

The AAR, however, observed that the company is not a formal school but an institution providing special training/coaching to students enrolled in formal schools for education up to higher secondary or equivalent. The company’s work can be claimed to be an education service in layman’s understanding, but it does not qualify so as prescribed under the government notification, it said.

On the contrary, the services offered by the company are appropriately classifiable under commercial training and coaching services and as such the company is not eligible for exemption under GST, the AAR ruled.

Sandeep Sehgal, partner-tax at AKM Global, said according to this ruling the process of developing students’ knowledge through regular schooling only could be classified as provided through an educational institution and subject to an exemption under GST.

“Hence, any private coaching institute, be it online or offline (like BYJU’s, Vedantu, Udemy etc), albeit could be providing curriculum-based courses but are not subject to the supervision of education boards (like schools) , therefore are not eligible to claim this exemption and would continue to be subject to GST at 18 per cent,” he said.

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