COMMERCIAL TRAINING OR COACHING CENTRE

 
Date of Introduction: 01.07.2003 vide Notification No. 07/2003 dated 20.06.2003

Definitions:

a) ‘commercial training or coaching’ means any training or coaching provided by a commercial training or coaching centre;

b) “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 recognized by law for the time being in force;

c) “Taxable service” means any service provided to any person, by a commercial training or coaching centre in relation to commercial training or coaching; and the term “service provider” shall be construed accordingly.

Value of taxable service:

Value of taxable service shall be the gross amount charged by the service provider of such service rendered by him.

Scope of Service:

Commercial coaching and training institutes that prepare applicants for Board/University Examinations, Competitive Exams like entrance examinations for IIT’s, IIM’s, Pre-Medical tests, Civil Services exams etc., or who impart knowledge in any field other than sports are required to pay service tax. However, pre-school coaching or training centres or any institute or establishment, which issues a certificate of diploma or degree or any educational qualification recognized by law for time being in force, are excluded from tax net.

Exemptions :

i. Services in relation to commercial coaching and training provided by :a) Vocational training institutes; b) Computer training institute; and c) Recreational training institute; were exempted from service tax w.e.f. 1st July, 2003 vide Notification No.9/2003-Service Tax dated 20th June, 2003 as amended. 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. were not chargeable to service tax. This exemption was in force upto 30.06.2004. In absence of extension of this exemption, these services fall under purview of Service Tax.

ii. 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 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. 10/2003-such coaching or training is exempted 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.
 

Board’s clarifications:

Circular No. 59/8/2003 dated 20.06.2003

i. Commercial coaching provided through postal means would also be covered under service tax and the charges including postal charges collected for rendering this service would be subjected to service tax.

ii. 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.

iii. Whether individuals going to houses to impart tuition/coaching would be chargeable to service tax:

It is clarified that service tax is on institution /establishments. Therefore, only those service providers are covered under the service tax who have some establishment for providing commercial coaching or training i.e. institution 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 centre 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.

iv. 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 centre 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.
Circular No.65/14/2003 dated 05.11.2003

Where value of taxable service is received in advance for a service which became taxable subsequently, service tax has to be paid on the value of service attributable to the relevant month/quarter which may be worked out on pro-rata basis.
 

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