Report On Accounting System And Gst Applicability

Report On Accounting System And Gst Applicability

Report On Accounting System And Gst Applicability On Aviation Academy

Education” is not defined in the CGST Act but as per Apex Court decision in “Loka Shikshana Trust v/s CIT”, education is the process of training and developing knowledge, skill, and character of students by normal schooling.

Education is one of the major sectors of any economy. The education of country’s youth decides how the economy of that country will flourish. Education promotes understanding, vision, creativity and productivity of people which helps in the advancement of a country. In India, Education is provided with both by the public as well as private sector.

Education Provided By Higher And Private Institutions:

The education provided by the private school from preschool to higher secondary is exempted under GST. Apart from the exemption, one should also divert towards the fact that the education provided by the private institutions currently grabbing the nation on a fast pace will likely to get expensive up to 3 or 5 percent after the rollout of the new goods and services tax in India. As institutions and universities are not mentioned in the exempted list, it is expected that 18% of GST to be levied on them. All the other cases of charity or giving poor education assistance still counted in exemption but still, the Indians considers private education most preferred and would pay an extra penny to claim it for their children.

Education By Coaching Institutes

Coaching institutes are playing a very important role in today’s competitive world. Most of the students are enrolling in the coaching institutes and want to crack the competitive exams. Previously, the government charged 14% tax on all such educations and now it is increased to 18% which will be disappointing for the students preparing for government exams, IITs, banking, and other professional courses.

1. What were pre-GST laws laid down for Educational Institutions

  1. Services provided by an educational institution to its students or faculty or staff were exempt. (Mega Exemption -Notification Number ST-25/2012 dated 20/06/2012)

Later the exemption in relation to services provided to educational institutions was modified with effect from 01-04-2014 and scope of the exemption for services provided to the Educational Institutions (Institution providing pre-school education and education up to higher secondary school or equivalent) was restricted to some specified services namely-

  1. Transportation of students, faculty and staff
  2. Catering, including any mid-day meals scheme sponsored by the Government;
  3. Security services performed in such educational institution
  4. Cleaning services performed in such educational institution
  5. House-keeping services performed in such educational institution
  6. Services relating to admission to, or conduct of examination by, such institution

Any other service provided apart from those mentioned above to educational institution (Institution providing pre-school education and education up to higher secondary school or equivalent) was taxable

Also, any service provided to an institution other than Institution providing pre-school education and education up to higher secondary school or equivalent was taxable.

What is the meaning of Education as a part of curriculum for obtaining a qualification recognized by law’? 

Educational services as ‘a part’ of the curriculum that has been prescribed for obtaining a qualification prescribed by law and conduct of degree courses by colleges, universities or institutions which lead grant of qualifications recognized by law would be covered in negative class. Training given by private coaching institutes would not be covered as such training does not lead to grant of a recognized qualification.

Education Services are classified in heading 9992 and are further sub-divided into six groups comprising of 

  1. Pre-primary education services
  2.  Primary education services 
  3.  Secondary Education Services 
  4.  Higher education services
  5.  Specialized education services 
  6. Other education & training services and educational support services
  7.  Under the GST regime, core educational services has been exempted vide Notification No. 12/2017-CT(R) dated 28 June 2017/ Notification No. 09/2017-IT(R) as amended from time to time.

Composite and Mixed Supply

If utilities for education, lodging and boarding provided by the boarding schools are combined into a single structure, it is exempted from GST. If the value of education or lodging or boarding are attached then these services are bundled, and their taxability will be determined in terms of the principles laid down. In case the fee structure is distinct for education, lodging and boarding, then such services would be evaluated separately. Since the predominant factor of education is determined by its service, the idea of providing residence will not be considered taxable.

Registration of Educational Institutions 

Educational Institute is providing only education as a service, then fees charged by the educational institute would attract Nil rate. In that case that educational institute is not required to be registered.

Educational Institute is providing not only education , but also providing other services i.e providing books & uniforms to students, then that educational institute is liable to be registered.

Exempted and Non-exempted Education Services 

Services provided by an educational institution to students, faculty and staff –

  1. The education provided by the private school from preschool to higher secondary is exempted under GST. 
  2.  Transportation of students, faculty and staff; 
  3.  Catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory; 
  4. Security or cleaning or house-keeping services performed in such educational institution; R Services relating to admission to, or conduct of examination by, such institution up to higher secondary: 
  5.  Entrance exam fee is exempted from the GST
    1. Vocational skill development program approved under national skill certification and monetary reward scheme .

      6 .Income from education is wholly exempt from GST if a charitable trust is running a school, college or education institution for abandoned, orphans, homeless children, physically or mentally abused persons, prisoners or persons over the age of 65 years or above residing in a rural area.

      7.Government or local authority or governmental authority carrying on the activity of education is exempted from GST as this is not included in the ambit of supply of services. For Example – Government schools / Municipal schools. 

      8.GST is not leviable on foods and drinks that are supplied by schools (up to higher secondary) directly to their students. 

      1. National skill development corporation set up by the Indian government R National skill development corporation approved sector skill councils .

      10.National skill development corporation approved assessment agencies R The national skill development programs approved by NSDC .

Following are not Exempt from GST:

  1. Supplies provided by third parties like the musical instrument, computers, sports equipment, 
  2. After school activities offered directly by third parties, 
  3. Food and accommodation supplied for the excursion as described above, 
  4. Uniform, stationery, and other non-academic related supplies
  5. 5.If the school runs summer camp or coaching classes for other students apart from the school students

No GST/Service Tax on training courses provided in fields of aviation, hospitality and travel management:

  1. Where assessee was providingtraining courses in aviation, hospitality and travel management and Tribunalheld that assessee was exempted from payment of service tax under Notification No. 24/2004-ST, dated 10-9-2004, SC dismissed appeal filed against judgment of Tribunal.
  2. Where assessee, a training institution, received recognition from a foreign entity but no representational right was granted to it by foreign entity and Tribunal held that assessee was not liable to pay service tax on consideration paid to such foreign entity under category of ‘franchise services’, SC dismissed appeal filed against judgment of Tribunal.

  3. Where assessee, a training institution, had franchisees and from which it was receiving reimbursement for expenditure incurred by it towards text books, study materials,etc. and Tribunal held that such receipts were not includible in value of taxable service, appeal filed against impugned judgment was dismissed by SC.

Accounting for Educational Institutions

Generally, accounts of an educational institution are maintained under Cash-basis of accounting and not under Mercantile-basis of accounting.

Collection of tuition fees, admission fees, fines, session charges and special fees— laboratory fees, library fees, sports fees etc. — should be separately recorded in Collection Register. Students’ Ledger must be maintained where all these collections should be credited to the respective students. Students’ Ledger should also include free studentship, concessions and writing-off irrecoverable fees which are to be sanctioned by higher authority or Managing Committee etc.

Periodical reconciliation should also be made between the fees collected, fees outstanding at the beginning and at the end of the period, fees written-off with fees that should have been collected according to the number of students in different classes having regard to the number of students enjoying free studentship, concessions etc. Separate receipts should also be made for grants from Government D.P.I, or U.G.C. etc., scholarships, stipends etc. All these information are to be recorded in a columnar Cash Book.

NOTE ; All invoices , challans and other documents relating to student including with other universities or educational  board relating to registration , examination etc. should be raised in the name of the student himself/herself for Tax purposes.