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Indian Service Tax

Commercial Traininig or Coaching Centre

Effective date: 1/7/2003

Authority: Notification No. 7/2003-ST, dt. 20/6/2003 (For full text see under "Business Auxiliary Service").

Rate of Service Tax: 8% upto 9-92004. 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definitions

"Commercial Training or Coaching" means any training or coaching provided by a commercial training or coaching centre; [Section 65 (26)]

"Commercial Training or Coaching Centre" means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field .other than the sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include preschool coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognised by law for the time being in force; [Section 65 (27)]

Taxable Service: Services rendered by a commercial training or coaching centre to any person

Value of Taxable Service: Gross amount charged for providing such taxable service

Exemptions

See Chapter on "General Exemptions"
Specific exemptions
Centre/establishment/institute which issues a certificate/degree/diploma recognised by law even if coaching is provided for competitive examinations
Pre-schooling upto 9th standard
Sports
Individuals going to houses to import coaching/tuition
Free in housing training provided by employer

Person liable to pay: Commercial training or coaching centre

Head of A/c: Tax collection - 00440229, Other Receipts - 00440230, Deduct Refunds - 00440231.

Questions & Answers

Q. Whether intensive tuition/coaching institutes/group of individuals for various competitive exams/correspondence and foreign degree courses/ spoken language course liable for Service Tax?

Ans. Commercial coaching and training services provided by institutes that prepare applicants for Board examinations and competitive exams, like entrance examinations for IIT, Joint Entrance Exams/Pre-medical Tests, Civil Services Exam, etc. are chargeable to service tax.

However, services in relation to Commercial Coaching and training, provided by:

Vocational Training Institute
Computer Training Institute and
Recreational Training Institute

have been exempted from service tax w.e.f. 1st July, 2003 vide Notification No. 9/2003 Service Tax. Therefore, vocational coaching and training services provided by typing and shorthand institutes, TV/Vehicle repairs training institutes, tailoring institutes, industrial training institutes, foreign language institutes, computer training centres, hobby classes, institutes teaching martial arts, painting, dancing etc., would not be chargeable to Service Tax. This exemption Notification 9/2003-S.T. is effective only up to 29th February 2004.

Q.Whether service tax is leviable on postal/correspondence coaching?

Ans. Service Tax is leviable on any coaching or training provided by an institution on commercial basis. Therefore, the coaching provided by postal means would also be covered under the service tax.

Q. Whether individuals going to houses to impart tuition/coaching would be chargeable to service tax?

Ans. Service tax is on institutions/establishments. Only those service providers are covered under service tax who have some establishment for providing commercial coaching or training.

Thus, individuals providing services at the premises of a service receiver would not be covered under service tax. However, if coaching or training center provides commercial coaching by sending individuals to the premises of service receivers, such services would be chargeable to service tax.

Q. Whether commercial coaching imparted to students of standards 1 to 9 is taxable?

Ans. The coaching imparted to students of standard 1 to 9 is taxable as service tax is applicable on commercial coaching provided by institutes that prepare applicants for Board examination and competitive exams.

Whether commercial coaching provided by institute to the students of degree exams held by universities are chargeable to service tax?

Ans. Yes. The commercial coaching given to t}: students to prepare them to prepare for university degree exam is liable for service tax.

[Source: Directorate of Publicity and Public Relations, Customs & Central Excise, New Delhi, October, 2003].

Changes from 10/9/2004

F.No. B2/8/2004-TRU, Date: 10/9/2004

22. Vocational and Recreational Coaching Institute:

Vocational and recreational training institute have been exempted from service tax. (Refer Notification No. 24/2004-S.T., dated 10/9/2004).

Main text of Department Circular/Trade Notice

[Paras 2.2.1 to 2.2.3 of Circular No. 59/8/2003, dt. 20/6/2003] 2.2 Vocational Training and Coaching Centres:

2.2.1 Commercial coaching and training services provided by 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. However, services in relation to commercial coaching and training, provided by

Vocational training institute
Computer training institute and
Recreational training institute

have been exempted from service tax w.e.f. 1st July, 2003 vide Notification No.912003-Servtice Tax dated 20th June 2003. Therefore, vocational coaching and training services provided by typing and shorthand institutes, TV/Vehicle repair training institutes, tailoring institutes, industrial training institutes, foreign language institutes, computer-training centers, hobby classes, institutes teaching martial arts, painting, dancing etc would not be chargeable to service tax. This exemption would remain in force upto 29th February 2004.

2.2.2 Institutes like the Institute of Chartered Accountants of India some time hire the services of other institutes to impart some part of training (like language or computer training) to the students undertaking courses for obtaining recognized degrees/diplomas (like Chartered Accountancy) from their institute.

Whereas institutes like the Institute of Chartered Accountants of India will not be chargeable to service tax because they confer qualifications recognized by law, the institutes or centers providing such part of training may be, otherwise under service tax net. Vide notification No. 1O/2003-Service tax dated. 20th June, 2003, exemption has been provided w.e.f. 1st July, 2003 to such services rendered by commercial training or coaching centers from service tax which form an essential part of the course or curriculum leading to issuance of recognized certificate, diploma, degree or any other educational qualification. The exemption is subject to the condition that the receiver of such service (for example, student) makes payment for the entire course or curriculum to the institute or establishment issuing such certificate, diploma etc. and not to the commercial coaching or training center.

2.2.3 Certain doubts have been raised in case of commercial coaching and training. In this regard, the following is clarified

Whether service tax is leviable on postal coaching: It is clarified that service tax is leviable on any coaching or training provided by an institution on commercial basis. Therefore, 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.
Whether service tax is leviable on institutes providing commercial coaching in addition to recognized degree courses: Some institutes like colleges, apart from imparting education for obtaining recognized degrees/diploma/certificates, also impart training for competitive examinations, various entrance tests etc. It is clarified that by definition, such institutes or establishments, which issue a certificate, diploma or degree recognized by law, are outside the purview of "commercial training or coaching institute". Thus, even if such institutes or establishments provide training for competitive examinations etc., such services rendered would be outside the scope of service tax.
Whether individuals going to houses to impart tuition/coaching would be chargeable to service tax: It is clarified that service tax is on institutions/establishments. Therefore, only those service providers are covered under the service tax who have some establishment for providing commercial coaching or training i.e. institutional coaching or training. Thus, individuals providing services at the .premises of a service receiver would not be covered under service tax. However, if coaching or training center provides commercial coaching by sending individuals to the premises of service receivers, such services would be chargeable to tax, as in this case, the individuals are rendering services On behalf of an institution.
Whether free summer training! in house training provided by employers to their employees are covered under service tax net: It is clarified that in case employers provide any free training themselves, no service tax is chargeable. However if an employer hires an outside commercial coaching or training center for imparting some training to its employees, then the payment made by the said employer to such coaching center will be chargeable to service tax.