Research › Search › Judgment

Karnataka High Court · body

2023 DIGILAW 1173 (KAR)

Alva's Education Foundation v. State of Karnataka

2023-10-05

B.M.SHYAM PRASAD

body2023
ORDER : 1. The petitioner, which runs institutions imparting higher secondary education and education recognized as “qualification” in law, has called in question the third respondent's order dated 17.06.2023 under the provisions of Sections 73, 50(1) and 122 of the Karnataka Goods and Service Tax Act/Central Goods and Service Tax Act, 2017 [for short, 'KGST/CGST Act, 2017'] read with Rule 142(5) of the Karnataka Goods and Service Tax Rules, 2017 [for short, 'KGST Rules']. 2. Sri V. Raghuraman, the learned senior Counsel for the petitioner, submits that the petitioner's grievance is with the third respondent's reading of the expressions “educational institution” and “exempted service” for the purposes of the Notification dated 28.06.2017 in No. 12/2017 [for convenience, is referred to as “the Notification dated 28.06.2017”] and the conclusion that the fee collected by the petitioner from its enrolled students to extend the benefit of coaching for entrance examination and other educational services would not be exempted service. Smt. Jyoti M. Maradi, the learned High Court Government Pleader for the respondents, is heard in the light of this grievance for final disposal and the records are perused. 3. The third respondent has observed that the petitioner has charged its students (1) the following amounts, which are hereinafter commonly referred to as 'coaching fees': (1) However, the third respondent has opined that the amount collected as “application fee” and for prospectus are exempted under Sl. No. 66 of the Notification dated 28.06.2017: [a] Tuition fees towards II PUC CET Crash & Coaching and CA-CPT Coaching. [b] Training fees for providing certification courses & placement and training fee for JV- AIET. [c] Penal fee/fine. [d] Various Misc. Fees viz., towards Alva's Nudisiri event, abacus, students welfare fund, internet, damages to hostel mess property, library fee and college fees. The third respondent, while observing that the amounts/fees charged to the prospective students for entrance or admission or eligibility certificate [including the fee charged for issue of Migration Certificates] are exempted under the entry in Sl.No. 66 of the Notification dated 28.06.2017 but not the coaching fees charged, and therefore, the petitioner must pay GST on such coaching fees. The third respondent's conclusion is based on two footings viz., its interpretation of “educational institution” as contained in Clause 2(y) of the Notification dated 28.06.2017 and reading of the Circular dated 03.08.2022 in No. 177/09/22-TRU. 4. The third respondent's conclusion is based on two footings viz., its interpretation of “educational institution” as contained in Clause 2(y) of the Notification dated 28.06.2017 and reading of the Circular dated 03.08.2022 in No. 177/09/22-TRU. 4. The third respondent, relying upon the entry in SL No. 66 of the Notification dated 28.06.2017, the notification issued by the State Government on 29.06.2017 and 25.01.2018 and paragraph 4.2 of the Circular dated 03.08.2022, has observed that an educational institution for the purposes of exemption from GST would be: (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 recognized by any law for the time being in force. (iii) Education as a part of an approved vocational education course. The Third respondent based on this observation has opined that the term “educational institution” as clarified in sub-clause (aa) of paragraph 4.2 of the Circular dated 03.08.2022 covers institutions providing services by way of education as part of curriculum for obtaining a qualification recognized by any law for the time being in force, and that the expression “education as part of curriculum for obtaining qualification recognized by law” in paragraph 4.2 (aa) could only mean “such educational services which are for imparting of education as 'a part' of the curriculum that has been prescribed for obtaining a qualification prescribed by law”. Therefore, the third respondent has concluded that the conduct of degree courses by colleges, universities or institutions which lead to grant of qualifications recognized by law would be covered. 5. Therefore, the third respondent has concluded that the conduct of degree courses by colleges, universities or institutions which lead to grant of qualifications recognized by law would be covered. 5. The third respondent has next referred to paragraphs 4.3 and 4.4 of the Circular No. 177/09/2022-TRU dated 03.08.2022, to observe that the clarification is as regards the applicability of GST on the application fee charged for entrance or the fee charged for issuance of eligibility certificate for admission or for the issuance of migration certificate by educational institutions, and in this regard has extracted as paragraph No. 4.4 of the Circular to indicate that such paragraph reads as under:- “Accordingly, it is clarified that the amount or fee charged from prospective students for entrance or admission, or for issuance of eligibility certificate to them in the process of their entrance/admission as well as the fee charged for issuance of migration certificates by educational institutions to the leaving or ex-students is covered by exemption under Sl.No. 66 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.” 6. At the outset this Court must observe that the Circular dated 03.08.2022 is issued clarifying the educational services exempted from GST in view of the Notification dated 28.06.2017, and if the first part of the clarification is about educational services offered by an educational institution, the second part of the clarification is about the collection of entrance fee or fee for conduct of examination or other fees. The clarification as regards the first aspect is in paragraph 4.3 of the Circular dated 03.08.2022, and the clarification on fee collected as “entrance fee or fee for conduct of examination or other fees”, the second aspect, is in later part of paragraph 4.3 and paragraph 4.4. However, the first respondent in opining that coaching fee is not exempted from GST by extracting paragraph 4.2 of the Circular dated 03.08.2022 has actually extracted paragraph 4.4 which will not be germane. 7. However, the first respondent in opining that coaching fee is not exempted from GST by extracting paragraph 4.2 of the Circular dated 03.08.2022 has actually extracted paragraph 4.4 which will not be germane. 7. This Court, to bring about this obvious aspect, must extract the paragraphs 4.2, 4.3 and 4.4 in the Circular dated 03.08.2022, and these paragraphs read as follows: 4.2 In this regard, it is stated that educational service supplied by educational institutions to its students are exempt from GST vide Entry 66 of the Notification No. 12/2017 Central Tax (Rate), dated 28.06.2017 relevant portion of which read as under: “Services provided: (a) by an educational institution to its students, faculty and staff. (b) [aa] by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee.” 4.3 Therefore, it can be seen that all services supplied by an 'educational institution' to its students are exempt from GST. Consideration charged by the educational institutes by way of entrance fee for conduct of entrance examination is also exempt. The exemption is wide enough to cover the amount or fee charged for admission or entrance, or amount charged for application fee for entrance, or the fee charged from prospective students for issuance of eligibility certificate to them in the process of their entrance/ admission to the educational institution. Services supplied by an educational institution by way of issuance of migration certificate to the leaving or ex-students are also covered by the exemption. Accordingly, such activities of educational institution are also exempt. 4.4 Accordingly, it is clarified that the amount or fee charged from prospective students for entrance or admission, or for issuance of eligibility certificate to them in the process of their entrance/admission as well as the fee charged for issuance of migration certificates by educational institutions to the leaving or ex-students is covered by exemption under Sl. No. 66 of Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017. 8. The third respondent, who had to examine the expanse of the expression educational services contemplated under the exemption Notification dated 28.06.2017 in the light of the Circular dated 03.08.2022, had to necessarily consider the same in the light of the paragraph 4.2 and the first sentence in paragraph 4.3. No. 66 of Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017. 8. The third respondent, who had to examine the expanse of the expression educational services contemplated under the exemption Notification dated 28.06.2017 in the light of the Circular dated 03.08.2022, had to necessarily consider the same in the light of the paragraph 4.2 and the first sentence in paragraph 4.3. However, the third respondent is persuaded to hold against the petitioner relying upon the later part of paragraph 4.3 and paragraph 4.4 overlooking the first part of paragraph 4.3. 9. There is an obvious error in this as the question is not about the entrance fee collected but about the coaching fee which will have to necessarily be examined in the light of the clarification in the Circular dated 03.08.2022 stating that all services supplied by an “educational institution” to its students are exempt from GST as mentioned in the first sentence of paragraph 4.3. Therefore, there must be interference with the impugned order. 10. Sri. V. Raghuraman submits that the petitioner apprehends, given the reference to the definition of an “educational institution” in the impugned order, that the third respondent, even if the matter is remitted for reconsideration, could conclude that coaching assistance extended to the students for the purposes of taking different entrance examination would be outside the fold of exempt services because the expression educational institution contemplates only pre-schools/higher secondary education and education for obtaining a qualification recognized in law. 11. It would suffice for this Court to observe that when this Court is interfering on the ground that the third respondent has not examined the exemption in the light of the relevant part of the clarification in the Circular dated 03.08.2022, the third respondent must extend due opportunity to the petitioner and consider whether the Circular dated 03.08.2022 exempts “services of coaching” offered by an educational institution to its enrolled students to prepare for different entrance examinations. This Court must also observe that the petitioner must be reserved liberty to raise all grounds to substantiate its case that in view of the clarification as aforesaid the provisions of the exemption Notification dated 28.06.2017 exempts all services provided by the educational institution to its students. 12. This Court must also observe that the petitioner must be reserved liberty to raise all grounds to substantiate its case that in view of the clarification as aforesaid the provisions of the exemption Notification dated 28.06.2017 exempts all services provided by the educational institution to its students. 12. Sri Jyoti M.Maradi, the learned High Court Government Pleader, at this stage submits that the re-consideration that this Court has provided may not include the re-examination of the question whether the abacus course extended by the petitioner to its students with the assistance of an external agency, and she submits that this would be because the abacus course is not recognized in any law as a qualification. 13. In response, Sri V. Raghuraman submits that this very question has come up for consideration before the High Court of Gujarat in Educational Initiatives Pvt. Ltd. v. Union of India reported in 2022 (63) G.S.T.L. 45 (Guj.) and it is ultimately held that the exemption provisions in tax statutes must be liberally construed in accordance with the object to be achieved and the facility of abacus course would definitely fall within the exemption Notification and the reasons assigned by the Division Bench of the High Court of Gujarat must necessarily prevail. This Court is of the considered view that the third respondent must necessarily examine even this aspect as part of reconsideration now enabled in the light of the reasons afore by the Division Bench of the High Court of Gujarat in the aforesaid decision. Hence, the following: ORDER: The petition is allowed-in-part, and the impugned order dated 17.06.2023 [Annexure-A] is quashed and the proceedings are remanded to the third respondent for reconsideration reserving liberty to the petitioner to file a detailed response. The third respondent is called upon to decide afresh in the light of the reply filed including additional reply now enabled.