Ruling: M/s CIGMA MEDICAL CODING PRIVATE LTD 

Pankaj Bajpai

New Delhi, July 20, 2021: The Kerala Authority for Advance Ruling recently held that fee payment facilitation services provided by a training centre in the course of business, without any service charge from either students or the certification institute, falls outside the scope of ‘supply’ under section 7 of the CGST Act, 2017.

The Coram of Sivaprasad S and Senil A K Rajan, in the context of the case it was hearing, said the collection and payment of examination fee to the American Academy of Professional Coders (AAPC) by the applicant, on behalf of the students who are enrolled for training with the applicant, is not liable to GST subject to fulfilment of conditions stipulated under Rule 33 of CGST Rules 2017. 

The applicant in the present case is engaged in providing training for students in medical coding. This medical coding examination is conducted and certified by the AAPC, headquartered in Salt Lake City, USA. 

The applicant had approached the AAR seeking an advance ruling as to whether the payment made to AAPC as examination fee for students on behalf of some of the students of the applicant institute as a pure agent, would be ‘service’ under GST and would there be any tax liability for the same, when the applicant is collecting the actual examination fee and remitting that amount to AAPC as such without taking any service charges either from students or from AAPC.

The AAR noted that the applicant has to satisfy the conditions stipulated in Rule 33 of the CGST Rules 2017 to exclude the amount collected as examination fees from the taxable value of services provided by the applicant. 

“In the first situation, the applicant collects exam fee from the students who are enrolled for training with them and makes payment to AAPC on the basis of authorization from the student. This examination fees is paid by the applicant to AAPC for the examination and certification services provided by the AAPC to the students in addition to the training and fee payment facilitation service provided to the students by the applicant,” found the AAR. 

Therefore, the Coram held that all the conditions mentioned in the said Rule 33 for exclusion of the amount collected as examination fee from taxable value of services provided by the applicant stood satisfied. 

“In the second situation, the students are not enrolled with the applicant for training but have approached the applicant for facilitating payment of fees to AAPC for procuring the examination and certification services provided by AAPC. The applicant therefore collects the actual amount of examination fee and remits that amount to AAPC on behalf of the student without collecting any service charges either from the student or from AAPC,” found the AAR.  

The Coram noted that in the second situation, the applicant collects the examination fee from the students and remits it to AAPC and no service charge is collected for the fee payment facilitation service either from the student or AAPC. 

In order to come within the scope and meaning of supply as defined in Section 7 of the CGST Act, the activity / transaction shall be for a consideration in the course or furtherance of business, reiterated the Authority.  

The AAR highlighted the fact that fee payment facilitation services are provided by the applicant in the course or furtherance of their business as the same is being made without consideration, it falls outside the meaning and scope of supply as defined u/s 7 of the CGST Act, 2017.  

Thus, the Authority for Advance Ruling concluded that the applicant is not liable to pay GST on the fee payment facilitation services provided to outside students without consideration.

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