GST and Examination Services: Key Exemptions Explained

Introduction

The Goods and Services Tax (GST) in India has been a topic of significant discussion, especially regarding its applicability to the education sector. While education is largely considered a noble service and is granted exemptions under various provisions, the services ancillary to education, particularly those related to examinations, have faced ambiguity in taxation. This article aims to provide a detailed understanding of the GST implications on examination services, mock tests, and related proctoring services provided to educational institutions, particularly autonomous institutions.

Understanding the GST Framework for Educational Institutions

Under the CGST Act, 2017, an “educational institution” is defined under Section 2(15) as an institution that provides education as a part of a curriculum leading to a qualification recognized by law. The Notification No. 12/2017-Central Tax (Rate), dated 28th June 2017, provides GST exemption for specific services rendered by such institutions, which include:

• Conduct of examinations,
• Assessment of students,
• Services forming part of a curriculum leading to a recognized qualification.

The Supreme Court in Loka Shikshana Trust v. CIT has defined education as the process of training and developing knowledge, skill, and character. This precedent highlights that education is primarily a social activity rather than a commercial one, justifying the exemption of core educational services from taxation.

Classification of Education Services Under GST

Education services are classified under Heading 9992 (as per Notification No. 11/2017-Central Tax (Rate)) and are further categorized into:

• Pre-primary, primary, and secondary education services
• Higher education services (general, technical, and vocational)
• Specialized education services
• Educational support services, including examination-related services

The GST rate varies depending on the classification of the service, with core educational services enjoying exemption, while commercial training and coaching services generally attract 18% GST.

Are Examination Services Provided to Educational Institutions Exempt from GST?

One of the key exemptions under Entry 66 of Notification No. 12/2017-Central Tax (Rate) is that services provided by an educational institution by way of the conduct of examination to students are exempt from GST. This clearly establishes that examinations, as an essential component of education, do not attract GST when conducted by educational institutions themselves.

However, ambiguity arises when third-party service providers render services related to examinations, such as:

• Conducting mock exams,
• Digital proctoring services,
• Examination assessment and evaluation,
• Question paper setting and other allied services.

Amendment to Entry 66 – Expansion of Exemption to Examination & Admission Services

A significant development in this context is the amendment of Entry 66 through Notification No. 2/2018-Central Tax (Rate), which removed the restriction that examination and admission-related services be limited to institutions providing education up to higher secondary level.

Key Implications of This Amendment:

• The exemption now applies to all educational institutions, including those providing higher education, technical education, and professional courses.
• Services related to admissions and examinations conducted by such institutions continue to remain exempt.
• This ensures that educational institutions conducting examinations beyond the higher secondary level, such as universities and autonomous institutions, are also eligible for GST exemption.

This amendment is a crucial clarification that reinforces the GST law’s intent to keep education-related services tax-free to make higher education accessible and affordable.

Mock Exams and Assessment Services – Are They Covered Under GST Exemption?

Mock exams are often an integral part of an educational institution’s curriculum as they help students prepare for final examinations. These preparatory assessments serve a direct educational purpose and are conducted in alignment with the institution’s academic structure.

Legal Provisions Supporting Exemption

• Entry 66 of Notification No. 12/2017 extends the exemption to examination-related services.
• CBIC Circular No. 82/01/2019-GST further clarifies that services directly linked to education, such as assessment and testing, are to be treated as exempt educational services.

Thus, if mock examinations are conducted by or on behalf of an educational institution as part of its curriculum, they should qualify for GST exemption. However, if such services are provided independently for commercial purposes (e.g., to individuals not enrolled with an educational institution), they may attract GST.

Proctoring Services: Essential for Examinations and GST Applicability

Proctoring services involve overseeing the examination process, either physically or digitally, to ensure academic integrity. Many institutions engage third-party vendors to facilitate digital proctoring in online examinations. The key question is whether such services, when provided to an educational institution, should attract GST.

Exemption Under Entry 66

• If the proctoring service is integral to conducting the examination and is directly provided to an educational institution, it should be exempt from GST.
• The exemption should apply as long as the proctoring service is not a standalone commercial service but an essential part of the examination process.

Judicial Precedents Supporting Exemption for Examination Services

Several judicial rulings have reinforced that services directly related to the conduct of examinations qualify for GST exemption:

1. National Board of Examination vs. Union of India & Ors.

• The Delhi High Court ruled that services provided by the National Board of Examination (NBE) in conducting examinations are not liable to GST under Notification No. 12/2017-Central Tax (Rate).
• The ruling confirmed that examination services by educational institutions should be GST-exempt.

2. Educational Initiatives Pvt. Ltd. vs. Union of India

• The Gujarat High Court held that the government cannot levy GST on services provided to educational institutions for conducting exams.
• The judgment emphasized that “examinations are an essential component of education.”

Conclusion

Given the above legal provisions and judicial precedents, it is evident that examination-related services, including mock exams, assessments, and proctoring services, should be considered GST-exempt, provided they are:

1. Conducted by or on behalf of an educational institution.
2. An essential part of the academic curriculum leading to a recognized qualification.
3. Not structured as standalone commercial services.

The amendment in Notification No. 2/2018 further strengthens the position that examination and admission-related services are not limited to higher secondary education but extend to all recognized educational institutions.

The GST framework intends to keep education tax-free to promote accessibility and affordability. Any interpretation that seeks to levy GST on such services would be contrary to the legislative intent and judicial pronouncements supporting GST exemptions in the education sector.

Thus, it is crucial for educational institutions and service providers to structure their engagements carefully, ensuring that examination services are clearly defined as part of the educational framework to avail the rightful GST exemption.