Coming to the gems of Indian taxation rules, I had always wondered how come flying training institutes don't have to pay service tax in India while a private tutor teaching for 10+2 exam strictly speaking is liable to service tax.
Here is an excerpt of a ruling from Authority for Advanced Ruling on Custom, Excise and Service Tax related CAE (a TRTO in India) appeal on exemption of service tax. (Feb 4, 2010)
Coming to the decision of the Customs, Excise and Service Tax Appellate Tribunal in the case of M/s Pasha Educational Training Institute (para 20),the Learned Tribunal has not specifically discussed the aspect as to how the training in the appellant-institute would directly enable the trainee to seek employment or undertake self employment. Except referring to the fact that the appellant institute is recognized by IRDA no other reason is given to say that the appellant institute satisfies the ingredients of a vocational training institute. Moreover, there is a possibility of candidate undergoing training in the said institute seeking self employment in some form or the other in the insurance sector. In the case before us the factual position as far as aircraft pilots are concerned is very much different .A Commercial Pilot ’s Licence holder cannot seek the job of flying an aircraft for which he has undergone Type Rating Training unless an endorsement to that effect is made in the licence of the CPL holder by the DGCA. It is the endorsement which makes him eligible to obtain employment with Airlines to fly the aircraft for which he has been type rated and not the fact of having completed the training with the institute. Surely the medical assessment required to be appended with the application form cannot be given by training institute. The DGCA clearly requires more than the course completion certificate for endorsing the Aircraft Type Rating in the licence of CPL holder. It is incorrect to claim on behalf of CFTI that a trainee pilot can directly obtain employment after completion of the course. The activity which enables the CPL holder to get the employment is the endorsement on the licence by the DGCA. If a similarity has to be drawn a motor vehicle driver cannot legally obtain employment as a driver merely after undergoing training in a driving school unless he has obtained a driving licence from the State Transport Authority. M/s Pasha Educational Training Institute ’s judgment has to be analysed in this background.
I agree whole heartedly to the Authority, its the stamp on your DGCA license which gets you the job and not the training.
PS: My personal view on service tax is, all things sold which are not products must be services and hence must be taxed, no exemptions whatsoever.