Service Tax Not Applicable on University’s Rental Income from Banks, Post Offices etc: CESTAT [Read Order]

The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that service tax is not applicable on a university’s rental income earned from banks, post offices, canteens, and similar facilities, as these services form part of the exempt educational service under Section 66D(l) of the Finance Act,1994.

Barkatullah University, appellant-assessee,was investigated by the DG GSTI, which found that it had not paid service tax on affiliation/inspection fees and rental income for the period from July 2012 to June 2017. The total taxable amount was ₹22.03 crore, and the service tax liability, including cess, was ₹2.89 crore.

A show cause notice dated 7.3.2018 was issued proposing recovery of the tax along with interest and penalty. These demands were later confirmed in the impugned order.

The two member bench comprising Dr.Rachna Gupta(Judicial Member) and P.V. Subba Rao(Technical Member) observed that the  service tax demand was on charges collected by the assessee for allowing banks, post offices, canteens, and similar facilities to use its buildings and auditoria.

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The assessee, explained that these facilities were provided to support students and staff, not to earn income, and formed part of its overall educational service, which was exempt under the negative list in section 66D(l) of the Finance Act.

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The appellate tribunal noted that the Karnataka High Court had already held in the Rajiv Gandhi University case that such rental income was not taxable, and the Supreme Court had dismissed the Revenue’s appeal against that decision.

Relying on this, the CESTAT held that the issue was settled and set aside the service tax demand. The appeal was allowed.

To Read the full text of the Order CLICK HERE

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