Introduction
The Goods and Services Tax - Central Board of Indirect Taxes and Customs(‘CBIC’) has recently released a circular dated 11.10.2024[i] (‘Circular’), providing important clarifications on the applicability of GST to certain services based on the recommendations of the GST Council’s 54th meeting held on 09.09.2024. The circular addresses ambiguities in GST regulations concerning services like affiliation services by Universities to Colleges, Educational Boards to Schools, transport by helicopter, preferential location charges, etc. The circular has not only clarified current GST applicability but has also provided provisions for retrospectively regularizing payments on these services. The breakdown of each clarified service, providing a detailed overview of their tax implications, as stipulated by CBIC, are explained as follows:
GST on Affiliation Services by Universities to Colleges
Universities often provide affiliation services to colleges to verify that they meet the necessary requirements in terms of infrastructure, faculty, financial stability, etc.
The circular clarifies that these affiliation services, provided by universities to constituent colleges, are not exempt from GST.
An 18% GST rate has been applied to affiliation services as these are not considered related to student admissions or examination services, which are otherwise exempt.
Affiliation services provided by universities do not fall within the scope of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017.
GST on Affiliation Services by Central and State Educational Boards to Schools
Similar to universities, educational boards and councils provide affiliation to schools to ensure adherence to certain standards.
The Circular states that affiliation services by educational boards are subject to taxation.
Affiliation services to government schools (established, owned, or controlled by governmental authorities) are exempt from GST, effective 10.10.2024. The exemption came into effect through Notification No. 08/2024 - Central Tax (Rate), dated 08.10.2024.
The GST liability on such services from 01.07.2017 to 17.06.2021 is regularized, addressing previous ambiguities about the taxation of accreditation services provided by educational boards.
GST on Directorate General of Civil Aviation (‘DGCA’) -Approved Flying Training Courses
Flying training courses conducted by DGCA-approved Flying Training Organisations, which lead to qualifications recognized under the Aircraft Rules, 1937, are exempt from GST.
Courses that lead to pilot license qualifications, as DGCA mandated, qualify under the educational institution exemption in Notification No. 12/2017- Central Tax (Rate), dated 28.06.2017.
The exemption applies only to training courses approved and recognized by DGCA that require completion certification.
GST on Transport of Passengers by Helicopter
The GST Council recommended a reduced GST rate of 5% on passenger transport by helicopter on a seat-sharing basis, effective 10.10.2024.
GST payments on helicopter passenger transport on a seat-sharing basis from 01.07.2017 to 09.10.2024 are regularized.
Passenger transport by helicopter on a charter basis will continue to attract a GST rate of 18%.
GST Treatment for Incidental Services in Goods Transportation in Case of Goods Transport Agency (‘GTA’)
Ancillary services such as loading, unloading, packing, and temporary warehousing provided by GTAs are to be treated as a composite supply with the main service of goods transport.
If these incidental services are invoiced separately, they will not qualify as a composite supply and will be treated as independent supplies subject to GST.
GST on Import of Services by Foreign Airlines’ Establishments
The import of Services by foreign airline establishments in India from related foreign entities without consideration is exempt, effective 10.10.2024. GST payments on such services from 01.07.2017 to 09.10.2024 have been regularized.
GST on Preferential Location Charges (‘PLC’) for Properties
PLC, which allows buyers to choose their apartment location, is considered part of the construction service and is subject to the same GST rate as construction services before a completion certificate is issued.
PLC charges bundled with construction services for residential, commercial, or industrial complexes are taxed as part of the main construction service.
GST on Support Services by Electricity Transmission or Distribution Utilities
Services ancillary to electricity distribution (e.g., meter rental, connection setup, testing) provided by utilities are exempt from GST, effective from 10.10.2024.
GST on Services by Film Distributors and Sub-Distributors
Transactions between distributors and exhibitors, where theatrical rights are granted, fall under the GST Heading SAC 9996 and attract an 18% GST rate. Payments for these services between 01.07.2017 and 30.09.2021 have been regularized on an ‘as is where is’ basis to resolve past classification issues.
Conclusion and Comments
This circular marks a significant step by CBIC towards clarifying GST applicability across diverse sectors. The clarifications encompass a variety of services, including educational affiliations, aviation services, transport by helicopters, and support services by utilities, aligning with recent GST Council recommendations. Notably, by retrospectively regularizing payments for specific services, the CBIC aims to reduce litigation, offer relief to affected businesses, and standardize tax practices across industries. This circular not only provides immediate tax applicability guidelines but also reinforces the ongoing efforts of the GST Council and CBIC to create a more predictable and streamlined GST framework.
End Note
[i] Circular no. 234/28/2024-GST dated 11.10.2024.
Authored by Onam Singhal, Chartered Accountant at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.