GST Rates: Services by Educational Institution to students are exempted from Tax
Denying the reports that GST@18% is levied on fees being charged for lodging hostels, the finance ministry said that there is no change in tax liability relating to education and related services in the GST era, except the reduction in tax rate on certain items of education.
Putting an end to the rumors that GST@18 per cent will be levied on annual subscription/fees charged for lodging in hostels, the Union Ministry of Finance on 13 July 2017 in a notification said that services being provided by an educational institution to students, faculty and staff are fully exempt from GST (Goods and Services Tax).
The ministry in its notification said that there are reports that GST@18 per cent is being levied on charges of lodging facility in hostels, which is not true. There is no change in tax liability relating to education and related services in the GST era, except the reduction in tax rate on certain items of education.
The notification says, “It may be mentioned that services provided by an educational institution to students, faculty and staff are fully exempt.”
Definition of Educational Institution
Educational institution has been defined as an institution imparting
(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 recognised by any law for the time being in force
(iii) Education as a part of an approved vocational education course.
The notification says any services of lodging or boarding in hostels being provided by such educational institutions (as per above-mentioned definition) are fully exempt from GST. Annual subscription/fees charged as lodging/boarding charges by such educational institutions from its students for hostel accommodation shall not attract GST.
Other clarification on GST rates
Apart from the clarification on GST rates for hostel accommodations by an educational institution, the Ministry of Finance also clarified that services being provided by housing societies Resident Welfare Association (RWA) across the country will not become expensive under the Goods and Services Tax (GST) system.
In its clarification, the ministry said that there are some reports that services provided by Housing Society will become expensive under GST. These reports are completely unsubstantiated.
The notification said, “It may be mentioned that supply of service by RWA (unincorporated body or a registered non- profit entity) to its own members by way of reimbursement of charges or share of contribution up to an amount of five thousand rupees per month per member for providing services and goods for the common use of its members in a housing society or a residential complex are exempt from GST.”
Further, if the aggregate turnover of such RWA is up to Rs.20 Lakh in a financial year, then such supplies would be exempted from GST even if charges per member are more than Rs. five thousand.
When will the RWA be required to pay GST?
The finance ministry notification says the RWA will be required to pay GST on monthly subscription/contribution charged from its members if such subscription is more than Rs. 5000 per member and the annual turnover of RWA by way of supplying of services and goods is also Rs. 20 lakhs or more.
The notification says, “Under GST, the tax burden on RWAs will be lower for the reason that they would now be entitled to ITC in respect of taxes paid by them on capital goods (generators, water pumps, lawn furniture etc.), goods (taps, pipes, other sanitary/hardware fillings etc.) and input services such as repair and maintenance services. ITC of Central Excise and VAT paid on goods and capital goods were not available in the pre-GST period and these were a cost to the RWA.”
Thus, there is no change made to services provided by the Housing Society (RWA) to its members in the GST era.