Central or State Boards are educational institutions since 01.07.2017 – Delhi High Court

The judgment in the case of National Board of Examination in Medical Sciences vs. Union of India & Ors. delivered by the High Court of Delhi on 16.04.2024 addresses significant issues related to GST refunds and the tax status of Central or State Boards. For better appreciation of the controversy, it is worthy to note the legal framework of the issue:

Date	Law
01.07.2017	Exemption Notification No. 12/2017-CT (Rate) dated 28.06.2017 66. Services provided – (a) by an educational institution to its students, faculty and staff; ……….. 2. Definitions: (y)   “educational institution” means an institution providing services by way of,- …… (ii)   education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force; ………
25.01.2018	S.No. 66(aa) inserted 66. Services provided – (aa) by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee;
26.07.2018	Explanation 3(iv) inserted (iv) For removal of doubts, it is clarified that the Central and State Educational Boards shall be treated as Educational Institution for the limited purpose of providing services by way of conduct of examination to the students.
17.06.2021	Circular No. 151/07/2021-GST issued (i) GST is exempt on services provided by Central or State Boards ( including the boards such as NBE) by way of conduct of examination for the students, including conduct of entrance examination for admission to educational institution [under S. No. 66 (aa) of notif No. 12/2017-CT(R)]. Therefore, GST shall not apply to any fee or any amount charged by such Boards for conduct of such examinations including entrance examinations. ………. (iii) GST at the rate of 18% applies to other services provided by such Boards, namely of providing accreditation to an institution or to a professional ( accreditation fee or registration fee such as fee for FMGE screening test ) so as to authorise them to provide their respective services.

 

Judgment of the Hon’ble Delhi High Court

Hon’ble Court has held that Central or State Boards are educational institutions in terms of definition given at para 2(y) of the exemption Not. No. 12/2017-CT (Rate) dated 28.06.2017 i.e., since inception of GST law from 01.07.2017.

It has also been held that Explanation 3(iv) inserted on 26.07.2018 is for removal of doubts and merely seeks to clarify the scope of entries at S.No. 66(a) and 66(aa) of said exemption notification and hence, shall operate retrospectively from 01.07.2017.

In essence, National Board of Examination in Medical Sciences (NBEMS) is an educational board, not merely a Board. Therefore, the services provided by them are referrable to exemptions given at S.No. 66(a) as well as 66(aa).

While analyzing their services under S.No. 66(a) as well as 66(aa), Hon’ble court holds as under:

FNB/DNB Courses: Although there is no classroom teaching by the petitioner, it is, undoubtedly, involved in imparting education to the students enrolled with it as a part of a curriculum. Accordingly, it is held that entrance examinations, course examinations, exit examinations as also other services provided in connection to FNB (Fellowship of National Board) and DNB (Diplomate of National Board) courses run by them are exempt since 01.07.2017 under S.No. 66(a) ibid. Hon’ble court also observed that FNB and DNB Course Fee is not taxable which is collected and passed on to the accredited institutions by the petitioner.

NEET Examinations: In respect of NEET Entrance Examinations, Hon’ble court held that exemption shall be available to the petitioner under entry at S.No. 66(aa) from 25.01.2018. While holding so, Hon’ble court agreed that for these examinations as well, benefit of exemption is available under entry at S.No. 66(a) but since the aspirants of NEET examinations are not students of the petitioner, exemption shall be under entry at S.No. 66(aa).

Hon’ble court clarified that Circular No. 151/07/2021-GST dated 17.06.2021 at para 4(i) makes reference to entry at S.No. 66(aa) only, but the exemptions are referrable to entry at S.No. 66(a) as well. It has also been held that said Circular does not mean that all services provided by Boards are taxable. The purport and reach of said Circular is limited only to the extent of clarifying that screening test and accreditation fee is taxable.

Resultantly, for each financial year, orders rejecting the petitioner’s refund applications, filed twicely, are set aside and matter has been remanded back for consideration afresh in view of the observations made above

Remarks

Each Central or State Board must analyse their respective supplies within the framework of entries given at S.No. 66(a) and 66(aa) of the Exemption Notification No. 12/2017-CT (Rate). They are educational institutions in terms of definition given at para 2(y) of said notification.

In case the education is given as a part of curriculum to obtain qualifications recognized by law and the candidates are their students, exemption is available in terms of entries at S.No. 66(a) of exemption notification.

Ratio Decidedi

• Retrospectivity of beneficial amendment in exemption notifications where legislature so intends – Para 63
• Interpretation of word “education”, “curriculum” as also “educational institution” – Para 80 to 84
• Although there is no classroom teaching by the petitioner, it is, undoubtedly, involved in imparting education to the students enrolled with it as a part of a curriculum – Para 84.

 

Download copies of Judgment:

1. Lead Matter: WP No. 1298/2023_NBEMS vs UOI and Ors
2. WP 1299/2023_NBEMS vs UOI and Ors
3. WP 1300/2023_NBEMS vs UOI and Ors
4. WP 1303/2023_NBEMS vs UOI and Ors