MARCH 16, 2012

Education services under Negative List – confusion confounded

By S Sivakumar, CA

IN terms of the proposed Section 65B(66D) of the Finance Act, 1994 which contains the list of the negative services, a cursory glance at sub-clause (l) makes a highly confusing reading.

Here is what, the said sub-clausereads :

(l) services by way of -

(ii) 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;

I can understand that, pre-school education and secondary school education are exempt from the levy of service tax and rightly so. I can also appreciate that, education as a part of a curriculum for obtaining a qualification which is recognized by law, is exempt. Thus, education services in respect of professional courses like CA, CS, ICWA are exempt. Even courses like LLB, BL and ML would also be exempt. As per the Negative List, vocational educational services are also exempt from service tax.

But, what about the education courses giving degrees and post graduate degrees like BA/BCom/MCom/MBA, etc? These services are not included in the Negative List meaning that, these would be taxable. While Universities are recognized by law, most of the graduate and post graduate degrees are not recognized. Hence, it seems like while a student pursuing a CA course would not have to bear service tax, a student pursuing a PG course, would have to bear the brunt on service tax. This seems rather unfair.

Taking the discussion further…. Education services forming part of a curriculum for obtaining a qualification recognized by law is exempt. This would mean that, short term courses, seminars etc. run by the professional Institutes would be taxable.

It would have been better if the entire education sector is included under the Negative List. This could have been by specifying services rendered by recognized Schools, Colleges and Professional Institutes, under the Negative List. By having confusing provisions vis-à-vis the education sector, the Government is bound to increase litigation.

(The Author is Director, S3 Solutions Pvt Ltd, Bangalore)