The Gujarat High Court, in a detailed ruling on the scope of the education-services exemption under GST, has held that assessment services supplied by an ed-tech company to schools for conducting the "ASSET" (Assessment of Scholastic Skills through Educational Testing) examination qualify as services relating to conduct of examination by an educational institution, and are therefore exempt from GST.

Facts of the Case

The petitioner, M/s Educational Initiatives Pvt. Ltd., a company registered under the Companies Act, 1956 and under the Goods and Services Tax Act, 2017, develops assessment and learning solutions for the K-12 education segment and conducts the ASSET examination for schools, which set and evaluate question papers and prepare results for students up to higher secondary level. The petitioner sought an Advance Ruling under Section 97 of the CGST Act, 2017 and Section 96 of the GGST Act, 2017 on whether the ASSET services supplied to schools are exempt under Entry No.66(b)(iv) of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017. The Gujarat Authority for Advance Ruling (GAAR), by order dated 02.07.2020, ruled in the petitioner's favour. On appeal by the department, the Gujarat Appellate Authority for Advance Ruling (GAAAR), by order dated 07.09.2021, reversed the GAAR and held that ASSET is conducted by the petitioner and not by the schools, and is therefore not covered by the exemption. The petitioner challenged the GAAAR order before the High Court under Article 226 of the Constitution.

Issues Involved

  1. Whether the ASSET assessment services supplied by the petitioner to schools/educational institutions constitute services "relating to conduct of examination" by such institutions within Entry 66(b)(iv) of Notification No.12/2017-Central Tax (Rate).
  2. Whether the GAAAR erred in holding that ASSET is conducted by the petitioner rather than by the schools, thereby denying the exemption.

Petitioner's Arguments

  • The GAAAR misdirected itself by framing the wrong question — whether ASSET is "conducted by the schools" — instead of examining whether the services relate to conduct of examination.
  • The words "relating to" in Entry 66(b)(iv) are wide and cover auxiliary services such as setting question papers, evaluation and result preparation for schools.
  • The CBIC's E-Flyer on education services and Circular No.151/07/2021-GST clarify that auxiliary services such as online testing, evaluation and result publication provided to educational institutions are exempt.
  • The GAAAR's interpretation defeats the legislative intent of keeping core education services, including examination-related services, out of the GST net.

Respondent's Arguments

  • The GAAAR correctly appreciated that the schools merely facilitated ASSET and received an "administration cost," while the petitioner alone set the question papers, evaluated answers and declared results.
  • The phrase "relating to" in Entry 66(b)(iv) cannot be stretched to bring within its scope an examination that is, in substance, conducted by the petitioner and not by the school.
  • ASSET is an assessment programme evaluating student performance and providing personalised feedback, and is distinguishable from an examination conducted by the school itself.

Court Order / Findings

  • The Court held that the term "education" must be given a wide meaning covering all matters relating to imparting and controlling education, and that examination is an essential and inseparable component of the education process, relying on Sole Trustee, Loka Shikshana Trust v. CIT and State of Tamil Nadu v. K. Shyam Sunder.
  • Since the question papers are set, answers assessed and results prepared by the petitioner, but the ASSET examination is, in substance, an examination of the schools' own students outsourced by the schools to the petitioner, the services fall squarely within Entry 66(b)(iv).
  • An exemption notification promoting education must be construed liberally in furtherance of its object, and the GAAAR's narrow reading that the schools merely "facilitated" the examination was erroneous.
  • The Court quashed and set aside the GAAAR order dated 07.09.2021 and restored/affirmed the original Advance Ruling dated 02.07.2020 granting exemption to ASSET services.

Important Clarification

  • Services of setting question papers, conducting the test and evaluating results for an educational institution's own students, even when outsourced to a third-party ed-tech provider, remain services "relating to conduct of examination" by that institution for purposes of Entry 66(b)(iv) of Notification No.12/2017-Central Tax (Rate).
  • The label of "administration cost" paid by the vendor to the school, or contractual terms mandating participation of all students in a class, do not by themselves change who is treated as conducting the examination for exemption purposes.
  • Exemption notifications intended to promote education must be interpreted liberally in line with their underlying object, and courts will look at the substance of the arrangement rather than form.

Sections Involved

  • Section 97, CGST Act, 2017 — application for advance ruling by a registered person.
  • Section 96, GGST Act, 2017 — constitution of the state Authority for Advance Ruling.
  • Entry No.66(b)(iv), Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 — exemption for services relating to conduct of examination by educational institutions.
  • Entry No.69(b)(iv), Notification No.9/2017-Integrated Tax (Rate) dated 28.06.2017 — equivalent IGST exemption.

Decision – In Favour of

The writ application was allowed in favour of the Assessee. The Gujarat High Court quashed the order of the Gujarat Appellate Authority for Advance Ruling dated 07.09.2021 and affirmed the original Advance Ruling dated 02.07.2020, holding that ASSET examination services supplied by the petitioner to schools are exempt from GST under Entry 66(b)(iv) of Notification No.12/2017-Central Tax (Rate).

Case Details

  • Court: High Court of Gujarat at Ahmedabad
  • Case No.: R/Special Civil Application No. 16476 of 2021
  • Coram: Hon'ble Mr. Justice J.B. Pardiwala and Hon'ble Ms. Justice Nisha M. Thakore
  • Date of Judgment: 18 February 2022
  • Parties: M/s Educational Initiatives Pvt. Ltd. vs Union of India & Ors.

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