CBIC: Coaching Institutes Collecting Lump Sum Fees Shall Pay 18% GST

The Central Board of Indirect Taxes and Customs (CBIC) chairman has clarified that coaching institutes shall pay 18% Goods & Services Tax (GST) on a composite supply basis.

Usually, the coaching institutes also provide notebooks, bags, t-shirts, sweatshirts, etc., to students and coaching services. The department found that the coaching institutes paid GST separately on an individual item basis and clarified that these bundled services fall under composite supply and attract 18% GST.

Composite supply means a supply comprising two or more goods or services, naturally bundled and sold as a combination. Also, one of the supplies shall be principal supply, and the items cannot be sold separately.

The Alwar CGST Commissionerate has observed in one case that the coaching institute is making short payments of GST. The coaching institutes supplied school bags, notebooks, t-shirts, sweatshirts, umbrellas, etc., along with commercial training or coaching services.

Individually the supplies attract GST as follows:

• Coaching services – 18%
• Notebooks – 12%
• T-shirts and sweatshirts – 5 % or 12% (based on MRP)
• Umbrella – 12%

Even though the students were charged a lump sum for all these goods and services, the coaching institute deposited GST on individual supplies.

The department pointed out that these bundled services were considered composite supplies. In this case, coaching service is the principal supply that attracts 18% GST. Accordingly, the department recovered the short payment of Rs. 3.6 crore.

It is becoming customary for the coaching institutes to provide bags, other materials, etc. They include all these charges in the course fee. Hence, the attempt to bifurcate it into different items just when making the GST payment is not justifiable.

However, charging GST on a principal supply basis would burden the students more as few items were kept in low tax slabs, especially to benefit the students. Hence, the council must focus on all such matters and provide a sector-wise customised solution to help trade and industry.

For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@cleartax.in