Dispute Resolution & Arbitration - January 2023 - Arbitration & Dispute Resolution

Before the Telangana AAAR - Magnetic Infotech Pvt Ltd (Applicant)

Telangana Appellate Authority on Advance Ruling, GST | 2022 SCC OnLine TS AAAR-GST 1

Background facts

The Applicant is a registered entity under the provisions of the Goods and Services Tax Act, 2017 (GST) and is engaged in providing pre and post examination services to educational boards, universities and open universities.
The Applicant has entered into agreements with various educational institutions located in different States. The scope of work in respect of the services being provided to the educational institutions by the Applicant can be divided into following three categories, vis (i) data processing for conduct of examinations, (ii) results preparation, and (iii) generation and printing of statistical data and reports in the prescribed proformas as required by the educational institutions. The Applicant was claiming exemption under the provisions contained in Sl. No. 66(b) of the Notification No. 12/2017 - Central Tax (Rate), dated June 28, 2017.
Accordingly, the Applicant sought an advance ruling on the scope of exemption provided under GST in such transaction, and whether the applicant shall qualify for it from the Telangana State Authority for Advance Ruling (TSAAR). In the advance ruling issued by the TSAAR, the Members of the Authority expressed different/conflicting opinions on the second issue.
As such, the Application was referred to the AAAR in terms of Section 98(5) of the CGST/TGST Act, 2017 for hearing and decision on the second issue before the TSAAR.

Issue at hand?

Whether the exemption is available to the Applicant in case of the services provided on sub-contract basis i.e., the Applicant provides pre and post examination services to the main contractor who in turn provides the said services to the educational boards and universities (including open universities)?

Decision of the Authority

It is pertinent to note that before the TSAAR, the Applicant had contended that that the supply of pre and post examination services to educational institutions are in relation to admission to or conduct of examination by the said institutions. Accordingly, the services being provided to the educational institutions would fall under Sl. No. 66(b) of the Notification No. 12/2017- Central Tax (Rate), dated June 28, 2017 and be eligible for exemption from payment of GST.
In case of provision of pre and post examination services by the Applicant as a sub- contractor to the main contractor who in turn provides the said services to educational institutions, the Applicant contended that as the services in relation to conduct of examination by the educational institutes are exempted, in this case also the services are in relation to conduct of examination by educational institutions which are ultimately provided to educational institute and, therefore, exemption would also be available to the Applicant even though the services are provided on sub-contract basis.
At the outset, the AAAR examined the contents of Sl. No. 66 of the Notification No. 12/2017 - Central Tax (Rate), dated June 28, 2017 and stated that the exemption is available when services are provided to an educational institution, by way of 'Services relating to admission to, or conduct of examination by, such institution'. In other words, the exemption would be available when the services are provided 'to' an educational institution for services relating to admission to, or conduct of examination by, such an institution.
The AAAR took into consideration the submissions/contentions advanced by the Applicant and held that since in the present case the main contractor to whom the Applicant is to provide services as subcontractor is not an educational institution, though the services are allegedly being provided to the educational boards and universities by the main contractor, the exemption contained in the aforesaid notification would not be available to the Applicant.
The AAAR further remarked that when exemption contained in a notification is to be claimed, an applicant is to satisfy the conditions prescribed therein and that the wordings of any notification have to be strictly read to allow or deny any exemption.
Accordingly, the AAAR held that the Applicant being a sub-contractor, is not eligible to claim exemption under the Notification No. 12/2017 - Central Tax (Rate), dated June 28, 2017.

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