Grant-in-Aid Received under Centrally Sponsored Schemes for Skill Development and Entrepreneurship Training Not Taxable: CESTAT [Read Order]
CESTAT held that the grant-in-aid received by CEDMAP under Centrally Sponsored Schemes for skill development and entrepreneurship training is not taxable.
Sponsored Schemes - Skill Development - Entrepreneurship Training - CESTAT - taxscan
Sponsored Schemes - Skill Development - Entrepreneurship Training - CESTAT - taxscan
The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that grant-in-aid received under Centrally Sponsored Schemes (CSS) for skill development and entrepreneurship training is not taxable under service tax law, as such funds are not consideration for any service rendered.
The Centre for Entrepreneurship Development, Madhya Pradesh (CEDMAP), a state government undertaking, appealed against service tax demands confirmed by the Commissioner of CGST and Central Excise. The department claimed that the grants received from the Central and State Governments for implementing training programs were taxable consideration for services.
The appellant’s counsel argued that the funds were government grants meant for welfare and public benefit and not payment for services. They submitted that CEDMAP acted only as an implementing agency for government schemes.
The counsel relied on CBEC Circular No. 125/1/2010-ST dated July 30, 2010, and the Supreme Court ruling in APITCO Ltd. v. CST, Hyderabad, affirmed that such grants are not taxable since no service provider–client relationship exists.
The two-member bench comprising Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) observed that the grants were public funds utilized for welfare programs and not for any commercial activity.
The tribunal explained that under Rule 6(2)(vii) of the Service Tax (Determination of Value) Rules, 2006, government subsidies and grants not directly affecting service value are excluded from tax.
The tribunal pointed out that CEDMAP, being a government body, implemented skill development schemes as part of social welfare objectives and did not provide taxable services. It held that grant-in-aid received under government programs could not be treated as consideration, setting aside the service tax demand, interest, and penalties.
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