University education services, including affiliation or other related student services, exempt from service tax: Madras High Court


The Madras High Court ruled that services provided by a university, including college affiliation and other related services provided to students, are exempt from the service tax levy under the Finance Act of 1994.

A single bench of Judge R Suresh Kumar made this ruling in a written petition filed by Madurai Kamaraj University challenging an order from the tax administration requiring a tax on services for the period 01.04.2013 to 30.06.2017.

The court rejected the tax service’s argument that the exemption is only available to colleges and not universities.

“The word” educational institution “cannot designate only the college affiliated with the university, but, it includes the university”, wrote Judge Suresh Kumar in the judgment.

Claiming exemption from the service tax, the University referred to the following provisions.

Article 66D (l) (ii) of the 1994 budget law included “education as part of a study program for obtaining a qualification recognized by any law in force” in the negative list of services which are exempt from the service tax.

This provision appeared in the articles of association from 07/01/2012 to 05/13/2016. However, from 14.05.2016 the clause “l” has been omitted or deleted. However, in the meantime, a notification called “Mega Exemption Notification” dated 20.06.2012 has been issued by the central government, exercising the powers conferred under subsection (1) of article 93 of the Finance Law, 1994, by which certain services had been mentioned for having granted exemptions from the scope of the service tax.

Clause 9 of the exemption mega-notification stated:

9) Services provided, –

(a) by an educational institution to its students, teachers and staff;

(b) to an educational institution, by means of, –

(i) transportation of students, professors and staff;

(ii) catering, including any government sponsored lunch program;

(iii) security or cleaning or housekeeping services carried out in such an educational establishment;

(iv) services related to the admission or the conduct of examinations by such an institution;

The mega-notification regime continued even from 07/11/2014, and it continued until 06/30/2017, when the GST came into effect.

On the basis of these provisions, the University Council Mr. Joseph Prabhakar argued that college affiliation services are exempt from the service tax.

Opposing it, the tax lawyer Mr. K Prabhu argued that the exemption was only available to institutions providing education directly to students, not universities. The receipts also referred to an order issued by the advance ruling authority denying an exemption request made by another university.

The question asked by the Court

The Court framed the question before it as follows:

“… whether it is the services rendered by the requesting university in granting affiliation and its related activities and also in providing shelter on their campus to service providers such as banking, post or catering, etc. , directly beneficial for students, staff and faculty of the university, are exempt services within the meaning of article 66-D of the finance law and also under the mega notification of exemption of the year 2012 as amended from time to time “

The Court rejects the narrow interpretation given by the tax administration

The restrictive interpretation given by the revenues to the exemption clauses to mean that they will only apply to institutions which directly provide education to students was rejected by the Court.

The Court noted that services such as admissions to educational institutions depend closely on the affiliation of these institutions with universities.

“..admission of students is strictly linked to the affiliation granted by the university. Therefore, the affiliation activity is an integral part of the training provided to any student with a view to qualifying for such a qualification. than a degree or diploma.

Thus, the services provided by the educational institution as the requesting institution, that is to say the university to give the affiliation, can form an integral part of the educational services, being provided jointly, to the both by University and College. The college cannot function independently without the affiliation of the university. Therefore, for the purpose of providing educational services, both the university and the relevant college, which affiliate with the university, cannot be separated ”, the court observed.

In addition, taking or conducting an exam is primarily a job of the university, and the colleges affiliated with the university are only facilitators.

Consequently, the Court held that the activities of the universities fell within the expression “services connected with the admission or the conduct of examinations by such an institution” in clause 9 (iv) of the mega-notification of exemption.

The Court disagreed with the Authority’s view on advance rulings and rejected the interpretation of recipes as “narrow and pedantic”.

In addition, the Court declared that services such as the rental of real estate for the purposes of banking, post, canteen, etc. has given a broader meaning to educational services which includes services to be provided not only to students, but also to faculty and staff. University faculty and staff are provided with transportation, board and lodging services, etc. the scope of the tax on services.

Setting aside the assessment order, the High Court said:

“… the requesting educational institution, that is to say the university, cannot be assessed for having charged a service tax for the educational services provided by it, which includes ‘affiliation or other services provided to students, faculty and staff of the university’.

Case title: Madurai Kamaraj University v. Joint curator

Click here to read / download the judgment


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