All coaching centres have to pay service tax, says High Court

In a major setback to the Pune-based Chanakya Mandal, an institution that trains Indian Administrative Services (IAS) candidates, Bombay HC junked its petition challenging the service tax levied by the Union government.

The HC upheld the government’s circular that levied service tax on institutions irrespective of them being a public trust or a private institution.

A Division Bench headed by Justice Satyaranjan Dharmadhikari heard a petition filed by Chanakya Mandal. The institution contended that it was registered as a ‘Public Trust’ and provided coaching to aspirants of IAS and other civil services.

The institution also claimed it did not work with a “profit motive” and so it does not fall under the net of service tax.

It also relied on the Central Board of Excise and Customs’ letter dated January 2009, which referred to an amendment with regard to non-levy of service tax on institutions, which are not profit making. The institution also contended that only “commercial coaching” falls under the category of service tax.

On the other hand, the Union government contended that there is no connection or relevance of “profit making” and that all institutions are brought under service tax. The government relied on the explanation inserted in the Financial Act, 2010.

After perusing the evidence and the provisions enshrined in the Finance Act, Justice Dharmadhikari said, “The explanation states that a “commercial training or coaching centre” shall include any centre or institute, where training or coaching is imparted and whether or not they are registered as a Trust or a society and carrying on its activity with or without profit motive. Therefore, the explanation removes any doubts with regard to the nature of the activity and its character.”

Justice Dharmadhikari dismissed the petition.