Flying training services qualifies as a “service by way of education as a part of a curriculum for obtaining a qualification”, eligible for GST exemption

Facts of the case:- The Applicant is a joint venture between Airports Authority of India (AAI) and International Flight School (Mauritius) Limited, operates as a Flying Training Organization (FTO) approved by the Directorate General of Civil Aviation (DGCA). The Applicant provides various flying training services to trainees aspiring to obtain pilot licenses and ratings recognized by DGCA under the Aircraft Rules, 1937. 

Issue:-  Whether the supply of flying training services provided by the Applicant to their trainees will be taxable or exempt under the GST law. If such a supply is taxable, what will be the rate of GST applicable.

Contentions of the Applicant:-  The Applicant contends that the training services they provide should be exempt from GST, based on the following grounds:

• The training curriculum, approved by the DGCA, is essential for obtaining licenses such as Commercial Pilot’s License (CPL) and other ratings. The training is conducted under a Training and Procedure Manual (TPM) and a Quality Assurance Manual approved by the DGCA, making the training a qualification recognized by law.
• Cited decision in the case of Indian Institute of Aircraft Engineering v. Union of India (2013), where the Delhi High Court held that training provided by a DGCA-approved institute qualifies as a “qualification recognized by law” and was exempt from service tax. They argue that this principle should extend to GST as well. Also, relied on the judgment of the Hon'ble Bombay High Court in the case of National Flying Training Institute Private Limited vs CBEC, 2023, where it was held that the course certificates issued by flying training institutes are recognized by law for the purposes of exemption from service tax. However. the jurisdictional officer contends that the aforementioned judgments pertain to the service tax regime and are not applicable under the GST regime. Moreover, it was submitted that the department has decided to challenge the Bombay High Court's judgment in the Supreme Court, and thus the matter is sub-judice.
• Referred Circular No. 117/36/2019-GST, which exempts certain training courses approved by the Director General of Shipping from GST. They argue that similar principles should apply to DGCA-approved courses.

Observations by AAR:-  The AAR stated that The key question here is whether the findings under the service tax regime can be applied to the GST regime, especially concerning the definition of an “educational institution” and the recognition of qualifications “by any law for the time being in force.”The GST exemption under Entry No. 66 of Notification 12/2017-Central Tax (Rate) provides exemptions for services provided by educational institutions. The definition of “educational institution” under the GST regime focuses on institutions providing services by way of education as part of a curriculum for obtaining a qualification recognized by any law in force. The applicant’s reliance on the judgments of the Bombay and Delhi High Courts raises the issue of the binding nature of these decisions on this authority. Generally, High Court decisions are binding on lower courts and authorities within their jurisdiction unless overturned by a higher court. However, the department has appealed against these judgments, and similar issues are pending before the Supreme Court, which introduces an element of uncertainty. 

The AAR observed as under:

A. The provisions under both regimes are substantially similar, with the primary difference being the addition of the phrase “as a part of a curriculum” in the GST regime. This phrase emphasizes the structured and formal nature of the educational process under GST, but does not fundamentally alter the nature of the exemption itself.

B. The judgment by the Hon'ble Bombay High Court, which pertained to the service tax regime, is relevant to the interpretation of similar provisions under the GST regime because, both the service tax and GST provisions are considered pari materia. As per the doctrine, interpretations under one regime can apply to similar provisions under another, unless there is a material difference in the language or context. Based on the doctrine, the findings of the Bombay High Court in the context of the service tax regime should apply to the GST regime unless contradicted by a higher authority or specifically modified by the new regime.

C. Given the substantial similarity in the provisions and the lack of any stay or reversal by a higher court, the Bombay High Court's interpretation remains binding. As such, the applicant, being an approved FTO with a recognized curriculum and training program, qualifies as an educational institution under the GST regime.

Rulings:- The applicant's training services, being part of a structured and approved curriculum leading to a qualification recognized by law (specifically under the Aircraft Act and Rules), should be exempt from GST under Entry No. 66 of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017. This conclusion is bolstered by the pari materia doctrine, which allows for the application of precedents under the service tax regime to the GST regime, particularly in the absence of significant changes in the statutory language.

Moreover, the applicant's status as an educational institution is reinforced by the specific statutory and regulatory framework governing its operations, similar to the maritime training institutes recognized under the Merchant Shipping Act, which also enjoy GST exemptions.