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Education Consulting Services Recruiting Students for Foreign Universities Taxable under GST: AAR

Education Consulting Services Recruiting Students for Foreign Universities Taxable under GST: AAR

09.06.2021 | Education News | EduLegaL  | www.edulegal.org | mail@edulegal.in

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21st March 2018, the West Bengal Authority for Advance Ruling (AAR) in In re Global Reach Education Services Pvt. Ltd. (GST AAR West Bengal) 05 of 2018, held that bodies/companies facilitating the admission of students in universities abroad are intermediaries representing Foreign Universities in India and their services do not fall within ‘Export’, within the meaning of Section 2(6) of the Integrated Goods and Services Act, 2017(GST Act).

The applicant company argued that it is an independent contractor promoting and marketing the courses of foreign universities in India; it is paid commission as a consideration in foreign convertible exchange for admissions availed through its marketing. Other subsequent services that are provided to students are ‘business auxiliary services’. To further its claims the applicant submitted the agreement copy of the contract with Australian Catholic University. The AAR decided to treat this agreement as a model specimen for all other agreements. The agreement contained contradictory terms regarding the relationship between the applicant and the University therefore the agreement in its entirety was read.

Clause 3.1 of the agreement read: Education Agent must promote the courses of the University to find out suitable prospective students and assist in recruitment of students in accordance with the procedures and requirements of the University”. Clause 4.1 placed the Education Agent under obligation to collect all fees and charges payable from the prospective students and forward the same to the University. Under clause 8, Agent is paid remuneration in the form of Commission as a percentage of the tuition fee. Therefore, if the agent is being paid after the successful admission of the student, it cannot be sustainably claimed that the agent is getting remuneration for marketing and advertisement as an independent contractor.

The AAR, studying the clauses observed that the:

“main service provided by the applicant is facilitating recruitment of students and the consideration is paid as commission on the basis of course fee and recruitment through the applicant. Promotion of the courses is incidental to the above principal supply. If promotion of university courses were the principal supply; the applicant should have been remunerated for its promotional activity no matter whether it facilitates recruitment or not”

It was opined that the applicant is representative of University in the Territory of India and therefore, clear that whatever services the applicable provisions are provided only as a representative of the University and not as an independent service provider.

Hence, being an intermediary service provider, the place of the Applicant’s supply shall be determined under section 13(8)(b) of the IGST Act and not under section 13(2) of the IGST Act. The place of supply is the territory of India under the abovementioned provisions. Section 2(6) must be stringently adhered to for claiming transaction as export and the condition under section 2(6)(iii) of the IGST Act is not satisfied in the present case. Applicant’s service to the foreign universities does not qualify as “Export of Services”, and is, therefore, taxable under the GST Act.

Vaibhav Karadale | Research Intern | EduLegaL


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