Educational Services

Educational Services


Education in its general sense is a form of learning in which the knowledge, skills, values, beliefs and habits of a group of people are transferred from one generation to the next through storytelling, discussion, teaching, training, and or research. Education may also include informal transmission of such information from one human being to another. Education frequently takes place under the guidance of others, but learners may also educate themselves (auto-didactic learning).

A right to education has been recognized by the government of India. At the global level, Article 13 of the United Nations' 1966 International Covenant on Economic, Social and Cultural Rights recognizes the right of education to everyone. Although education is provided free of cost by the government of India up to a certain age, yet in most of the government schools attendance of students falls short. In many cases it is seen that parents do not send their children to school and instead send them to do petty jobs with an intention to have an additional earning hand at home.



In ancient days education commenced under the supervision of a guru. Initially, education was open to all and seen as one of the methods to achieve Moksha, or enlightenment. As time progressed, due to superiority complexes, the education was imparted on the basis of caste and the related duties that one had to perform as a member of a specific caste. The Brahmans learned about scriptures and religion while the Kshatriya were educated in the various aspects of warfare. The Vaishya caste learned commerce and other specific vocational courses while education was largely denied to the Shudras, the lowest caste. The earliest venues of education in India were often secluded from the main population. Students were expected to follow strict monastic guidelines prescribed by the guru and stay away from cities in ashrams. However, as population increased centers of urban learning became increasingly common and cities such as Varanasi and the Buddhist center at Nalanda became increasingly visible.

Education in India in its traditional form was closely related to religion. Among the Heterodox schools of belief were the Jain and Buddhist schools. Heterodox Buddhist education was more inclusive and aside of the monastic orders. The Buddhist education centers were urban institutes of learning such as Taxila and Nalanda where grammar, medicine, philosophy, logic, metaphysics, arts and crafts etc. were also taught. Early secular Buddhist institutions of higher learning like Taxila and Nalanda continued to function well into the common era and were attended by students from China and Central Asia.


In present scenario Indian education has flourished to a great extent. Universities such as Delhi University and University of Hyderabad are one of the leading universities of the nation, contributing to the educated class of the nation. Further the government has laid the foundation of many IITs and IIMs in the recent years to give a boost to the education system of the nation. Top educational institutes in India include Indian Institute of Science Bangalore, IIT Bombay, All India Institute of Medical Sciences (AIIMS), IIT Kanpur, Jawaharlal Nehru University Delhi, Birla Institute of Technology and Science Pilani and Aligarh Muslim University.


Section 66D of the Finance Act, 1994 is about is about Negative List of Services. Educational Services are included in the negative list of services under clause (l) of section 66D. The said clause (l) of Section 66D of the Act provides for the following negative list services in relation to educational sector:

Services by way of—

    1. pre-school education and education up to higher secondary school or equivalent;

    2. education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force;

    3. education as a part of an approved vocational education course.

Thus, as per the negative list educational services can be bifurcated into following broad categories viz.

    1. Pre-school education and education upto higher secondary school or equivalent;

    2. Education as a part of curriculum for obtaining a qualification recognised by any law for the time being in force;

    3. Education as a part of an approved vocational education course.

    Pre-school education and Education upto higher secondary school or equivalent– It includes play schools, pre-nursery and nursery schools, crèche, day care centre, pre-kindergarten or any such purpose school or centre by whatever name called.

    As per , a leading school of thought, a preschool is an educational establishment offering early childhood education to children between the ages of three and five, or seven, prior to the commencement of compulsory education at primary school. They may be privately operated or government run, and the costs may be subsidized.

    While education upto higher secondary school or equivalent includes school education which is up to higher secondary (12th standard) or equivalent level (say, intermediate). Any education beyond higher secondary is not covered here. The use of expression ‘equivalent’ provides wider scope to school education implying that all education up to school leaving are in negative list.

    Services provided by international schools giving certifications like IB are equivalent to education upto higher secondary school, hence they are covered in negative list and are therefore outside the service tax net.

    Education as 'a part' of curriculum for obtaining a qualification recognized by law for the time being in force: Only those services are included under the heading of Education as 'a part' of curriculum for obtaining a qualification recognized by law which comprise following features:

      1. Education should be imparted as ‘a part’ of the curriculum;

      2. Curriculum should have been prescribed for obtaining a qualification recognised by law.

    Here the use of words “law for the time being in force” implies that such laws as are applicable in India at a given point of time. However, education leading to foreign qualifications shall be liable to payment of Service Tax. In Indian, context, it may be noted that recognition is granted by bodies such as University Grants Commission (UGC), All India Council of Technical Education (AICTE) etc.

    Foreign Courses conducted by private institutes – Taxable : Sometimes, private institutes conduct courses and issue diplomas or certificates in collaboration with certain foreign institutes or universities. In many cases, private enterprises conduct campus interviews of the students of such institutes and offer them jobs. Such certificates/diplomas may be accepted for higher education abroad.

    However, such a certificate/diploma cannot be called as the one ‘recognized by the law for the time being in force’ unless such a diploma/certificate has been specifically recognized by the statutory authorities such as UGC, AICTE. Hence, they would be subjected to tax.

    Keeping the aforesaid features in mind it can be concluded that:

    • Conduct of degree courses by colleges, universities or institutions which lead grant of qualifications recognized by law would be covered under negative list.

    • However, training given by private coaching institutes would not be covered as such training does not lead to grant of a recognized qualification.

    Education as a part of an approved vocational education course: Approved vocational educational course means:

      1. a course run by an industrial training institute (ITI) or an industrial training centre (ITC) affiliated to the National Council for Vocational Training or State Council for Vocational Training, offering courses in designated trades as notified under the Apprentices Act, 1961; or

      2. a Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Employment and Training, Ministry of Labour and Employment, Government of India.

    Negative list, therefore, does not include –

      1. Private tuitions : Private tuitions are not covered in the entry relating to education and hence the same shall be liable for service tax. However, private tutors can avail the benefit of threshold exemption. But this is at present a disputed issue as the definition of education upto higher secondary level nowhere excludes tuition provided to students. It simply states that “Pre-school education and education up to higher secondary school or equivalent” shall be covered in the negative list.

      2. Campus Recruitment fees: Fees charged by educational institutions in relation to campus recruitment from prospective employers are liable for service tax as such services are not covered in negative list.

      3. Institutes preparing students for Competitive Exams: Institutes that prepare applicants for Board examinations and competitive exams like entrance examinations for Indian Institute of Technology - Joint Entrance Examinations/Pre Medical Tests, Civil Services exams, etc. are chargeable to service tax.

        This in turn acts as a major setback for students aiming to make career in fields of science and commerce where entry is provided only after clearing designated examinations, but as we know that for exams such as JEE, CLAT are no piece of cake.

      4. Coaching provided by postal means: The coaching provided by postal means would also be covered under the service tax and the charges, including the postal charges collected for rendering this service, would be subjected to service tax. Here we can bifurcate postal coaching into two major heads viz.

        1. Postal coaching by an institute providing a degree recognised by law – covered in the negative list : Here, as the law itself states that educational services for obtaining a qualification recognised by law shall be covered in the negative list.

        2. Postal coaching for any other purpose : Postal coaching provided for any other purpose shall be liable to service tax.

      5. Personality Development Institutes: Institutes that offer general course on improving communication skills, personality development, how to be effective in group discussions or personal interviews, general grooming and finishing, etc. are not covered by any of the exemption pertaining to ‘vocational training institutes’. Hence, they are liable to service tax.

      6. Donation is not consideration [Circular No. 127/09/2010–ST, dated 16-8-2010] : Donation or grant-in-aid is not specifically meant for a person receiving such training for the specific activity, but is in general meant for the charitable cause carried out by the registered Foundation. Between the provider of donation/grant and the trainee, there is no relationship other than universal humanitarian interest. In such a situation, service tax is not leviable, since the donation or grant-in-aid is not linked to specific trainee or training.

    In case of Educational Institutions providing non-recognized qualification with recognized qualification courses, separate services have to be assessed separately. Provision of dual qualifications are two separate services as the curriculum and fees for each of such qualifications are prescribed separately. Service in respect of each qualification would, therefore, be assessed separately.

      1. In case of artificial bundling : If an artificial bundle of service is created by clubbing two courses together, then by application of the rule of interpretation under section 66F of the Act, it is liable to be treated as a course which attracts the highest liability of service tax.

      2. In case of natural bundling : However, incidental auxiliary courses provided by way of hobby classes or extra-curricular activities in furtherance of overall well being will be an example of naturally bundled course.


    As per para 2(oa) of Notification No. 25/2012-ST, dated 20-6-2012, “Educational institution" means an institution providing services specified in section 66D(l) of the Finance Act, 1994.

    The following exemptions have been provided in respect of educational services vide Notification No. 25/2012-ST, dated 20-6-2012,–

    The aforesaid exemption has been substituted by Notification No. 6/2014-ST, w.e.f. 11-07-2014, prior to substitution it was:

        1. Recreational training or coaching – Exempt [Entry 8 of Notification No. 25/2012-ST] : Services by way of training or coaching in recreational activities relating to arts, culture or sports are exempt from tax.

        2. Services to or by Educational Institution – Exempt [Entry 9 of Notification No. 25/2012-ST] : Services provided,-

          1. by an educational institution to its students, faculty and staff;

          2. to an educational institution, by way of,-

            1. transportation of students, faculty and staff;

            2. catering, including any mid-day meals scheme sponsored by the Government;

            3. security or cleaning or house-keeping services performed in such educational institution;

            4. services relating to admission to, or conduct of examination by, such institution.

    Services provided to an educational institution in respect of education exempted from service tax, by way of –

    (i) renting of immovable property ; or

    (ii) auxiliary educational services,

    was exempt from tax.

    Para 2(f) of Notification No. 25/2012-ST, dated 20-6-2012 defines “Auxiliary educational service” as any service relating to,–

          1. imparting of any skill, knowledge or education; or

          2. development of course content; or

          3. any other knowledge - enhancement activity, whether for the students or the faculty; or

          4. any other services which educational institutions ordinarily carry out themselves but may obtain as outsourced services from any other person, including following 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.

    Therefore, service tax is chargeable on such auxiliary educational services which are in respect of education chargeable to service tax.

      1. Effect of Substitution: The entire scheme of exemption has been modified. Earlier, the auxiliary educational services and renting of immovable property provided TO an educational institution in respect of education exempted from service tax was exempt from service tax.

        With effect from 11-07-2014 the following changes have taken place :

            1. concept of 'auxiliary educational services' under para 2(f) of the Notification No. 25/2012 dated 20-06-2012, stands deleted.

            2. The services provided by an educational institution to its students, faculty and staff shall remain exempt from tax.

            3. In the case of services received by the eligible educational institutions, exemption will be available only in respect of the services as specified as above.

            4. Further, services provided by way of renting of immovable property to educational institutions stands withdrawn.

              Thus, taking immovable property on rent for running exempted educational institution would be liable to tax. However, small service provider exemption would be available to the service provider.

        1. Services provided by National skill development corporation/Sector skill council/ Assessment agency/ Training Partner-Exempt [Entry 9A of Notification No. 25/2012-ST] : Any services provided by,-

            1. the National Skill Development Corporation set up by the Government of India;

            2. a Sector Skill Council approved by the National Skill Development Corporation;

            3. an assessment agency approved by the Sector Skill Council or the National Skill Development Corporation;

            4. a training partner approved by the National Skill Development Corporation or the Sector Skill Council,

          in relation to –

      1. shall be exempt.

          1. the National Skill Development Programme implemented by the National Skill Development Corporation; or

          2. a vocational skill development course under the National Skill Certification and Monetary Reward Scheme; or

          3. any other Scheme implemented by the National Skill Development Corporation,

        1. Educational or skill development programmes - Exempt [Entry 4 of Notification No. 25/2012-ST read with Para 2(k)] : Services by an entity registered under section 12AA of the Income-tax Act, 1961 by way of charitable activities relating to advancement of educational programmes or skill development relating to,–

          1. abandoned, orphaned or homeless children;

          2. physically or mentally abused and traumatized persons;

          3. prisoners; or

          4. persons over the age of 65 years residing in a rural area.

      2. Place of provision : As per Rule 4(2) of Place of Provision Rules, 2012, the place of provision for the services provided to an individual, which require the physical presence of the receiver with the provider for the provision of the service shall be the location where the services are actually performed.


    Education should be a balance of quantity and quality. In India, while we have substantially achieved the former, fulfilling the latter is a tremendous challenge.

    As per the Annual Status of Education Report (ASER) 2012 survey, 96.8 per cent of all Indian children between the age group of 6-14 years are now attending school. This detail points to the major problem that we have to now tackle – quality and cost.

    Speaking of the quality aspect first, what is the quality of education being imparted to these children—who will soon comprise the thinkers, innovators, leaders and makers of our country? What kinds of skills, competencies and abilities are these young minds picking up that will help them face the future?

    The answers are quite depressing. Everywhere across the nation, In government schools or private schools, whether in urban area or rural area the scene is very quite familiar – teachers teaching from textbooks, children learning by rote, very little experiencing or experimentation and almost no out-of-the-box thinking. India's poor performance in the Programme for International Student Assessment (PISA) tests (India ranked 71 out of 73 nations) is the proof that the claims of the government as nothing but bogus words. The result seems obvious on giving a glance at the extreme difference in the enrollment and attendance rates. Obviously government has got claims to make !! with 96% enrollment rate chest can be puffed up to 56 inches while no-one ever gets to know that on a average 25% government teacher skip school daily.

    According to the Census of 2011, every person above the age of 7 years who can read and write with understanding in any language is said to be literate". According to this criterion, the 2011 survey holds the National Literacy Rate to be around 74.07%. The youth literacy rate, measured within the age group of 15 to 24, is 81.1% (84.4% among males and 74.4% among females), while 86% of boys and 72% of girls are literate in the 10-19 age group. Now a very important question here raises its head, whether mere reading and writing are sufficient criterion to classify a person as literate in today's time? What about practical applicability? Confucius famously said, “I hear and I forget. I see and I remember. I do and I understand.” It is time to give emphasis on practical applicability of subjects as well.

    Further recent revealings have raised a very important issue, qualification of teachers. With government continuously lowering its admission criteria for filling the seats reserved for SC, ST and OBC candidates justification for student's future has been ignored. How can a we expect a teacher who has somehow managed to pass give a result of meritorious students.

    Now, moving onto the cost of education: The new reform brought in by the finance ministry under will act as a major setback in the field of education. The substitution of services to/by educational institution under exemption has limited the scope of educational services exempt under service tax law, this in turn will increase the cost of education in the nation.

    On one side government has covered the educational institutions under negative list due to this reason the institutes cannot take Cenvat credit of the tax paid by them for obtaining auxiliary services this will result in cascading effect of tax. On the other hand government claims to be promoting education. The government is not understanding a simple calculation that how can you promote anything by increasing its cost? Government should make its stand clear in the way of

    A nation cannot become great by its resources or its money but it becomes great by its citizens and the deeds of its citizens and for the development of those great citizens educational services play an integral role. For a developing nation such as India education is the key to the treasure of intelligent, efficient and dedicated work force. The government through its continuous efforts has partially achieved its goal of attaining 100% literacy but, we still have to cover a long way. Despite of various incentives provided by the government at various levels and huge allocation of annual budget of nation for the development of educational services the condition of education at the ground level is not satisfactory. From providing good teachers to basic sanitation in government schools a lot more needs to be done. And for this mammoth task effective planning and implementation has to be practiced. 

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