The Authority for Advance Ruling in Karnataka recently denied GST exemption to Isha Foundation’s proposed gurukul-style residential school, Isha Samskriti. In a significant ruling, the Authority held that the education provided by Isha Samskriti does not qualify as “charitable activity” and hence is not eligible for exemption under GST notifications.
Background
Isha Foundation, a public charitable trust registered under GST, filed an application for advance ruling to determine if the education provided by their proposed residential school, Isha Samskriti, would be GST exempt. Isha Foundation was established in 1992 by Sadhguru and is engaged in promoting education, yoga, meditation and other charitable objectives. It enjoys exemptions under sections 12AB and 80G of the Income Tax Act.
Questions Raised by Isha Foundation
The two questions raised in the advance ruling application are:
i) Whether the education provided by Isha Samskriti is exempt under Entry 69 of Notification 9/2017-Integrated Tax (Rate) dated 28.06.2017?
ii) If not, whether the education is exempt under any other notification?
Proposed School – Isha Samskriti
Isha Samskriti aims to provide traditional gurukul-style education to children aged 7-18 years. The curriculum focuses on subjects like Sanskrit, English, Indian classical music and dance, yoga, martial arts and basic arithmetic. The objective is holistic development of the child’s body, mind and energies. No formal certificates will be provided, but students can appear for NIOS board exams. Isha Foundation believes this education helps orient children towards their inner nature and spirituality.
Applicant’s Interpretation
Isha Foundation believes the education provided by Isha Samskriti should be exempt under Entry 1, Chapter 99 of Notification 9/2017-Integrated Tax Rate. This entry exempts services provided by IT section 12AA/12AB registered entities for charitable activities like advancement of religion, spirituality or yoga. They contended that the school’s curriculum is designed to enable spiritual growth of students through yoga, meditation, Sanskrit, classical arts etc. Hence, exemption should apply.
Findings of the Authority
i) Isha Samskriti is not an “educational institution” as per the definition in the GST notification. It does not provide mainstream school education.
ii) The school does not provide services for advancement of religion, spirituality or yoga. The subjects taught are not necessarily spiritual in nature.
iii) Therefore, the education provided by Isha Samskriti does not qualify as “charitable activity” and is not eligible for exemption under Entry 1.
iv) The education is also not exempt under Entry 69, which exempts only services provided by educational institutions.
Ruling of AAR Karnataka GST
In view of the above findings, the Authority ruled that:
i) The education provided by Isha Samskriti is not exempt under Entry 69 of Notification 9/2017.
ii) The service is also not exempt under any other notification.
Conclusion
The ruling establishes an important precedent regarding the scope of ‘charitable activities’ under GST law. Educational institutions planning curricula focused on subjects like yoga, Sanskrit, classical arts etc. will need to examine eligibility for exemption carefully in light of this ruling. The interpretation of ‘advancement of religion, spirituality or yoga’ and ‘educational institution’ by the Authority merits close consideration.
AAR Karnataka GST Order dated 13/07/2023: Education by Isha Samskriti not exempt from GST (Isha Foundation)