Facts of the Case

The petitioner, M/s Alva's Education Foundation, represented by its Managing Trustee Shri Vivek Alva, runs institutions imparting higher secondary education and education recognised as a "qualification" in law, including Alva's Nursing College, Moodbidare, Dakshina Kannada. It challenged an order dated 17.06.2023 (Order No.22802/2023-24, Reference No. ZD290623017361K) passed by the third respondent, the Deputy Commissioner of Commercial Taxes (Audit-4), under Sections 73, 50(1) and 122 of the Karnataka Goods and Service Tax Act/Central Goods and Service Tax Act, 2017 read with Rule 142(5) of the Karnataka GST Rules, 2017. The impugned order held that GST was payable on "coaching fees" charged by the petitioner for II PUC CET Crash & Coaching, CA-CPT coaching, certification/placement training and JV-AIET training, while treating only fees for entrance, admission, eligibility certificate and migration certificate as exempt under Sl. No.66 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017, based on the respondent's reading of CBIC Circular No.177/09/2022-TRU dated 03.08.2022.

Issues Involved

  1. Whether coaching fees collected by the petitioner from its enrolled students for entrance-examination coaching and allied courses are exempt from GST as services supplied by an "educational institution" to its students under Notification No.12/2017.
  2. Whether the third respondent correctly construed paragraphs 4.2 to 4.4 of CBIC Circular No.177/09/2022-TRU in denying exemption to coaching fees while granting it only to entrance/admission fees.
  3. Whether the impugned assessment order warranted interference and remand for fresh consideration.

Petitioner's Arguments

  • The third respondent misapplied Circular No.177/09/2022-TRU by relying on the latter part of paragraph 4.3 and paragraph 4.4 — which deal only with entrance/admission fees — while ignoring the first sentence of paragraph 4.3, which exempts all services supplied by an educational institution to its students.
  • The dispute concerned coaching fees, not entrance fees, and the correct clarification governing coaching fees was paragraph 4.2 read with the first part of paragraph 4.3 of the Circular.
  • Even on remand, the petitioner apprehended that the authority might again deny exemption by adopting a narrow reading of "educational institution" confined to pre-school/higher-secondary or qualification-linked education, excluding coaching for entrance examinations.
  • On the specific question of the abacus course, reliance was placed on Educational Initiatives Pvt. Ltd. vs Union of India, 2022 (63) G.S.T.L. 45 (Guj.), where the Gujarat High Court held that exemption provisions must be liberally construed and that an abacus course fell within the exemption notification.

Respondent's Arguments

  • Coaching fees charged for II PUC CET Crash & Coaching, CA-CPT coaching, certification/placement training and JV-AIET training fall outside "educational institution" services because they are not part of a curriculum leading to a legally recognised qualification, per paragraph 4.2(aa) of Circular No.177/09/2022-TRU.
  • Only the fee for entrance/admission, eligibility certificate and migration certificate is exempt under Sl. No.66 of Notification No.12/2017, as clarified by the latter part of paragraph 4.3 and paragraph 4.4 of the Circular.
  • Even if the matter is remanded, the abacus course extended with the assistance of an external agency should not be reconsidered as exempt, since it is not recognised in any law as a qualification.

Court Order/Findings

  • The Court found that the third respondent had conflated two distinct aspects of Circular No.177/09/2022-TRU — the general exemption for educational services under paragraph 4.2 and the first sentence of paragraph 4.3, and the separate clarification on entrance/admission fees in the latter part of paragraph 4.3 and paragraph 4.4 — and had erroneously applied the latter to the coaching-fee dispute.
  • The Court held that all services supplied by an educational institution to its students are exempt from GST under Entry 66 of Notification No.12/2017-Central Tax (Rate), and that the third respondent had to reconsider whether the coaching fees fell within this exemption, applying the correct part of the Circular.
  • The impugned order dated 17.06.2023 was quashed and the matter remanded to the third respondent for fresh consideration, with liberty to the petitioner to file a detailed response, including on the abacus course, in light of the Gujarat High Court's ruling in Educational Initiatives Pvt. Ltd.
  • Liberty was reserved to the petitioner to raise all available grounds before the reconsidering authority.

Important Clarification

  • CBIC Circular No.177/09/2022-TRU has two distinct limbs: paragraph 4.2 and the first sentence of paragraph 4.3 govern the general exemption for all services supplied by an "educational institution" to its students, while the latter part of paragraph 4.3 and paragraph 4.4 govern only entrance/admission/eligibility/migration fees — the two must not be conflated.
  • Coaching or training fees charged by an entity otherwise qualifying as an "educational institution" must be examined under the general exemption limb of the Circular, not the narrower entrance-fee clarification.
  • Exemption notifications under GST must be construed liberally in line with their object, following Educational Initiatives Pvt. Ltd. vs Union of India, 2022 (63) G.S.T.L. 45 (Guj.).
  • Even courses such as abacus training, if extended by an educational institution to its enrolled students, may merit consideration for exemption depending on the facts, and cannot be excluded merely because the course itself does not lead to a legally recognised qualification.

Sections Involved

  • Section 73 of the KGST/CGST Act, 2017 – determination of tax not paid or short paid for reasons other than fraud or wilful misstatement.
  • Section 50(1) of the KGST/CGST Act, 2017 – interest on delayed payment of tax.
  • Section 122 of the KGST/CGST Act, 2017 – penalty for specified offences.
  • Rule 142(5) of the Karnataka GST Rules, 2017 – procedure for issuance of summary of order in tax determination proceedings.
  • Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 – exempts specified services, including services by an educational institution to its students (Sl. No.66).
  • CBIC Circular No.177/09/2022-TRU dated 03.08.2022 – clarifies the scope of GST exemption on educational services and fees charged by educational institutions.

Decision – In Favour of

The petition was allowed in part: the impugned demand order was quashed and the matter remanded for fresh consideration in light of the correct reading of the exemption Circular, with the petitioner granted liberty to raise all grounds afresh, including on the abacus course. This is a win for the Assessee on the question of the correct application of the Circular, though the final entitlement to exemption on the coaching fees remains to be re-determined by the adjudicating authority — the Decision, in substance, is in favour of the Assessee, subject to reconsideration on remand.

Related Case Laws

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Case Details

  • Court: High Court of Karnataka at Bengaluru
  • Case No.: WP No.21311 of 2023 (T-RES)
  • CNR: Not available on record
  • Coram: Hon'ble Mr. Justice B.M. Shyam Prasad
  • Decision Date: 05.10.2023
  • Disposal Nature: Disposed of on merits regarding applicability of GST exemption – allowed in part and remanded

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