TN AAAR: GST Exemption Not Available on School Transport if Parents Pay Directly

For school transportation services where payments are made directly by parents, no Goods and Services Tax (GST) exemption is available, the Tamil Nadu State Appellate Authority for Advance Ruling (AAAR) has held.

The appellant, Tvl. Batcha Noorjahan, proprietor of M/s. School Transport had entered into long-term agreements with schools to deliver transportation for students and staff. But these services were only available for educational institutions, and the appellant collected transportation charges from parents of the students to use the service.

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The counsel of the appellant claimed that the service of transport must be considered as one furnished before the educational institutions, as the same was rendered as per the structured agreements, and the schools exercised oversight over its operations.

The counsel of the applicant, quoting the Notification No. 12/2017-CTR, claimed the exemption under Sl. No. 66, which waives the services given before educational institutions for the transportation of students, faculty, and staff. They relied on a favourable ruling in Advance Ruling No. 27/ARA/2023 (Muniansamy Abinaya), where a similar service was ruled exempt.

The bench including Dr. Ram Niwas (Principal Chief Commissioner of GST & Central Excise, Taminadu & Puducherry Zone/Member AAAR) and Dr. D. Jagannathan (Commissioner of Commercial Taxes Tamilnadu/Member AAAR) observed that under Section 2(93) of the CGST Act, the “recipient” of the service is the person responsible to pay consideration.

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Parents paid the charges for transportation, not the schools; the parents were considered the recipients. As per the tribunal, the transport allowance being in the name of the school was obligatory in nature and does not imply that the service was rendered to the school itself.

The AAAR refers to the exemption under Sl. No. 66 of Notification No. 12/2017-CTR outlined that the advantages are available only when the services are furnished by the educational institution. Services were directly furnished to the students or parents and not to the schools in this case, and students/parents bore the cost and engaged the appellant independently.

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The AAAR, only entering into agreements with schools, does not change the taxability when the schools are not filing for the service. No consideration was paid by the schools, and the schools were not the recipients of the service; therefore, the conditions for the GST exemption were not fulfilled.

The AAAR, the appellant is not entitled to the exemption under Notification No. 12/2017 – Central Tax (Rate), and GST is applicable on the transportation services rendered.