SEPTEMBER 19, 2018

By Vijay Kumar

What they don't teach you in Management Schools:

AS per Sl. No. 66 of Notification No. 12/2017-Central Tax (Rate), dated, June 28, 2017, GST on services provided by an educational institution to its students, faculty and staff, are unconditionally exempted. As per Sl. No. 67 of the same notification, services provided by the Indian Institutes of Management (IIM) for the following programmes except Executive Development Programme, were exempted:

(a) two year full time Post Graduate Programmes in Management for the Post Graduate Diploma in Management,

(b) fellow programme in Management;

(c) five year integrated programme in Management

When Sl. No 66 exempted services provided by an educational institution, what was the need to exempt courses by IIMs by Sl. No. 67? Is an IIM not an educational institution? The Notification defined educational institution as

"educational institution" means an institution providing services by way of,-

(i) pre-school education and education up to higher secondary school or equivalent;

(ii) education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;

(iii) education as a part of an approved vocational education course;

Probably, the idea was that the programmes by IIMs were not degrees recognised by law and so the IIMs were liable to pay GST on their course fee and so a separate exemption is given to IIM courses except Executive Development Programme. But by the 'Indian Institutes of Management Act, 2017' which came into force on 31 st January 2018, IIMs are now empowered to give degrees and titles and so they can now give MBAs and PhDs, which are recognised by Law and perhaps GST authorities. So, is the IIM eligible for exemption from GST as per Sl. No. 66 and is Sl. No. 67 infructuous?

This mighty question of Law was recently decided by two Additional Commissioner level officers of the GST constituting the Authority for Advance Ruling, Madhya Pradesh GST.

The IIM, Indore was before the AAR with the question, "Whether the course - Executive Post Graduate Programme in Management (EPGP), after enactment of Indian Institute of Management Act 2017 notified effective from 31 st January 2018, is exempted from Goods and Service Tax ?"

The IIM pleaded that with effect from 31.01.2018, they shall be entitled to exemption in terms of entry no. 66 of Notification 12/2017-CT (Rate), as they now qualify as Educational Institutions as defined for the purpose of this notification. Strange that the most coveted Management Schools in the country were not considered as Educational Institutions under the GST!

The AAR did not find an iota of ambiguity and ruled:

1. the Entry Number 67 of the Notification No.12/2017- Central Tax (Rate) and corresponding notification under MPGST Act, 2017 has been specifically put for Indian Institutes of Management and therefore there appears to be neither any reason nor any prudence in overlooking this specific entry and going to a General Entry i.e. Entry No.66. (Under what law is a 'general entry' in a notification not applicable when there is a specific entry?)

2. We do not find even an iota of ambiguity in the language of the impugned notification. Further, the principle of 'Strict Interpretation' of the statute has been propounded by the Hon'ble Supreme Court in catena of judgments, and one has to strictly go by what is written in the statute.

3. Though, there is no ambiguity in the matter before us, still we have to conclude that the services provided by the Applicant have a specific mention under Entry No.67 to the Notification 12/2017-Central Tax (Rate) and corresponding notification under MPGST Act, 2017, and therefore, there is no good reason to take shelter of a general entry (entry no.66) just to bring the Executive Post Graduate Programme under the ambit of exemption.

Now, if one entry in a notification allows an exemption and another entry doesn't, who has the choice of deciding which entry has to be availed?

In Winsome yarns - 2014-TIOL-3074-CESTAT-DEL, the CESTAT held, when two exemption Notifications are available to an assessee, he can always opt for the Notification which is most beneficial for him and in this regard the Department can not force the assessee to avail a particular exemption Notification.

The Karnataka High Court in a recent judgement - 2018-TIOL-1567-HC-KAR-CX, followed the decision of the Supreme Court in Share Medical Care vs. Union of India - 2007-TIOL-26-SC-CUS, wherein it was held that if two exemption notifications are applicable in a given case, the assessee may claim benefit of the more beneficial notification.

GST is all about re-inventing the wheel and the wheel was very simple if you remember. Only problem is you will have to roll it right up to the Supreme Court. It is time the IIMs introduced advanced GST in their curriculum. After all, what is a manager, if he cannot float in the confusion of GST. It was certainly not good management to go the AAR. One of the things they don't teach you in Management Schools is tax management and law management!

Kindly see 2018-TIOL-151-AAR-GST

Sub-contracting of an exempted service - Liability of GST?

In another interesting case, the same AAR decided another simple tax issue. The question raised before the AAR was,

An entity has been allotted Toll Collection work of certain road by NHAI. The said entity wishes to sublet the Toll Collection work to the company. Now, as the "Service by the way to access to a road or by a bridge on payment of toll charges" is exempted service as per Notification No. 12/2017-Central Tax(Rate) dated the 28th June, 2017 (Sr. No. 23)(Heading No. 9967), whether the same exemption will apply to services provided by the Applicant, i.e. Service by the way of access to a road or a bridge on payment of access to a road or a bridge on payment of toll charges on subcontract basis.

The Department felt that services providing access to a Road or Bridge on payment of toll charge is exempted by notification no. 12/2017 Central Tax(Rate) Dated 28-06-17 issued Under CGST Act and Notification no. FA-3-42/2017/1/V/53 Dated 30-06-2017 issued under MPGST Act, 2017. However, the consideration to be received by the sub-contractor from the contractor will be taxable.

The AAR almost agreed. It ruled:

In case of providing access to a Road or Bridge on payment of toll charge, the exemption is totally based on service of providing access to a road or a bridge on payment of toll charges. There is no restriction regarding the supplier or the recipient of the supply. In the instant case, therefore, even though the supply of the service to the user of the Toll Road is by the sub-contractor, GST is not payable on the amount of Toll Charges collected. It is exempted by Sr. No. 23 of Notification No. 12/2017-Central Tax(Rate) dated the 28th June, 2017.

Before you start applauding the AAR order, please note, there is a rider. The AAR went on to rule:

1. The above ruling in the application is limited to the question stated in Sl. No. 14 of the Application, which relates to the liability of Goods & Services Tax on the "Toll Charges collected. It has no bearing on the consideration received by the applicant from of Highway Infrastructure (P) Limited for the supplies made by the applicant to Highway Infrastructure (P) Limited.

2. As per the facts of the case, the applicant receives Toll Charges on behalf of Highway Infrastructure (P) Limited and remits a fixed sum to Highway Infrastructure (P) Limited out of the Toll Charges collected. In other words, the consideration for the supplies made to Highway Infrastructure (P) Limited is retained by the applicant, out of the Toll Charges.

3. The Toll Charges collected by the applicant are not "Toll Charges" per se in the hands of the applicant, but held in fiduciary capacity by the applicant, for onward remittance to Highway Infrastructure (P) Limited. The Ruling does not in any way relate to the Toll Charges retained by the sub-contractor, in terms of its agreement with Highway Infrastructure (P) Limited.

You don't need to pay GST for the toll charges, but you may have to pay it for the sub-contracting.

Kindly see 2018-TIOL-152-AAR-GST

Real GST?

Congress President Rahul Gandhi yesterday declared that the Congress, if voted to power in 2019, would change the way the Goods and Services Tax (GST) was structured and bring petrol and diesel under its ambit. He added, "This is not a real GST as there are five different levels. We will change the Gabbar Singh Tax, make it one tax, a true GST"