GST Exemption Denied on School Computer Training with Hardware Supply
Maharashtra AAR ruled that government school training projects bundled with computer hardware supply are fully taxable under GST.
- Ruling
- NO.GST-ARA- 48/2017-18/B-55 dated 25.06.2018
- Dated
- 25 Jun 2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- IL&FS asked if its government school computer training project was exempt from GST.
- Maharashtra AAR ruled the contract is not exempt and attracts full GST.
- The project included hardware supply maintenance site setup and teacher training together.
- Bundling goods and setup with training makes it a composite taxable supply.
In short
The company asked the Maharashtra Authority for Advance Ruling (AAR) whether its ICT @ School Project was exempt under Entry 72 of Notification No. 12/2017-Central Tax (Rate). The company had a five-year contract to set up computer labs, supply hardware and software, maintain equipment, and train teachers and students in government-aided schools. Under the contract, the equipment would be handed over to the government at the end of five years for Re 1. The company believed this qualified as an exempt training service provided to the government.
What has changed
How it worked before
Businesses executing government training projects under turnkey or BOOT (Build, Own, Operate, Transfer) models often assumed the entire contract was exempt from GST as a government training program.
What has changed
The authority ruled in order GST-ARA- 48/2017-18/B-55 that the contract is not exempt from GST. Because the contract bundled hardware supply, lab setup, and maintenance alongside computer training, it was a composite supply rather than a pure training service. Additionally, transferring hardware to the government at a future date constitutes a supply of goods under Goods and Services Tax (GST) rules. As a result, businesses cannot claim the Entry 72 exemption on contracts that combine training with equipment supply or infrastructure creation.
Who this affects
Businesses and contractors providing turnkey education, training, or IT infrastructure projects to government departments on BOOT or similar models.
An example
ABC Edutech wins a contract with a state government to deliver coding classes in public schools. The contract requires ABC Edutech to buy 100 laptops, set up internet routers, maintain the labs, and send tutors for three years. ABC Edutech asks whether it can claim a GST exemption under government training provisions. Based on this ruling, the tax office would view the project as a combined supply of goods and services, making the entire contract taxable.
What you should do
Businesses running similar government projects should review their contract structures and tax positions. An advance ruling binds only the applicant and their immediate tax officer, meaning other companies cannot automatically apply this ruling to themselves. If your contracts bundle training with hardware supply or lab setup, consult a tax professional or apply for your own advance ruling before claiming GST exemptions.
If you do nothing
Assuming this ruling automatically gives you exemption or tax protection can lead to severe financial risks. If a tax officer audits your contracts and decides you wrongly claimed a GST exemption, they can demand unpaid tax along with heavy interest and penalties. Relying on someone else's advance ruling without proper contract structuring offers no legal defense during an assessment.
The terms explained
- composite supply
- A transaction that includes two or more goods or services sold together as a single package.
- advance ruling
- A written decision by tax authorities explaining how GST laws apply to a specific business transaction before or during its execution.
- BOOT model
- A project model where a private company builds, owns, operates an infrastructure facility for a fixed period, and then transfers it to the government.
The ruling in detail
Authority for Advance Ruling
IL&FS Education and Technology Services Ltd.
NO.GST-ARA- 48/2017-18/B-55 dated 25.06.2018 · Maharashtra
Questions before the authority
- Whether the training services provided by the Applicant are covered under the scope of Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 read with Entry No. 72 of Notification No. 12/2017-State Tax (Rate) dated 29.06.2017 to the services provided by the Applicant under the ICT @ School Project?
Facts
The Applicant entered into an agreement on a Build, Own, Operate and Transfer (BOOT) model with the Director of Education (Secondary and Higher Secondary), Government of Maharashtra, to implement the ICT @ School Project across designated government-aided schools. The contract scope included supply and installation of computer hardware, software, site preparation (flooring, furniture, electrical fittings, LAN), equipment maintenance, and imparting computer training to students and teachers for five years. At the conclusion of the five-year period, the entire infrastructure was to be transferred to the government department at a nominal value of Re. 1/-.
Ruling
| Question | What the authority ruled |
|---|---|
| Applicability of Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) to services under ICT @ School Project | Answered in the negative Supply of goods and services under the project is not in compliance with all conditions of the exemption notification |
The Authority held that the exemption under Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) is **not applicable** to the Applicant's supply under the ICT @ School Project. The project involves a combined supply of goods (hardware, software, infrastructure) and services rather than purely a service rendered under a training programme. Consequently, the transaction fails to fulfill the prerequisite conditions of the exemption notification and is subject to GST.
Reasoning
Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) exempts services provided to the Government under a training programme where total expenditure is borne by the Government. The Authority observed that the Applicant's contract involves distinct components including procurement of hardware, site setup, long-term equipment maintenance, and deployment of faculty. This arrangement constitutes a **composite supply of goods and services** where computer training is not the principal or sole supply. Furthermore, under Para 1(c) of Schedule II of the CGST Act, 2017, the agreement to transfer title in goods at a future date upon payment of consideration qualifies as a supply of goods. Because the contract encompasses taxable supplies of goods alongside services, it does not qualify as purely a service provided under a training programme.
Provisions relied on
- Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017
- Entry No. 72 of Notification No. 12/2017-State Tax (Rate) dated 29.06.2017
- Schedule II Para 1(c) of the CGST Act, 2017
- Section 97 of the CGST Act, 2017
For the practitioner
Turnkey contracts under BOOT models involving infrastructure creation, hardware supply, maintenance, and training cannot claim exemption under Entry 72 of Notification 12/2017-Central Tax (Rate) as **pure training services**. Practitioners should advise clients that bundling equipment supply and maintenance with educational training creates a composite taxable supply subject to standard GST rates.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/mah_aar_48_2017-18_b-55_25.06.2018_il_fset.pdf
Legibility of the scan, as read: high.
Prepared 19-10-2026.
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