VAT on application fees and registration fees paid to Educational Institutions

As per Article 40 of Executive Regulation, Education services are considered Zero Rated on fulfilling the following conditions:

• Curriculum - Education servicesare provided in accordance with the curriculum recognized either by the federal or local competent government entity regulating the education sector where the course is delivered.
• Educational Institute is recognized by the federal or local competent government entity regulating the education sector where the course is delivered
• Where the Supplier of educational services is a higher education institution, the institution is either owned by the federal or local government or receives more than 50% of its annual funding directly from the federal or local government
• Supply of goods & services made by educational institute should be Zero-rated where they are directly in relation to educational services

An educational institution which follows the conditions laid down in Article 40 is called as 'qualifying educational institutions’. Thus, services rendered by a qualifying educational institution is zero-rated.

Consideration recovered by education institutions for rendering education services is zero-rated. However, there are certain additional considerations recovered for various reasons such as school trips, extra curriculum, books and reading material etc.

One type of consideration which school recovers before giving admission to students is theapplication/enrolment fees. Application fee is paid by an applicant to file an application fee for seeking admission in the education institution.

Though, one may consider that application fees should be zero rated considering it is education services. However, the law requires that only services rendered to students enrolled in the institution should be zero rated.

Accordingly, it may be difficult to classify such fees as Zero-rated.

Additionally, we have seen that there is an additional consideration in the name of ‘registration fees’ which is paid on obtaining admission in the schools. Also in certain cases such fees is adjusted with the tuition fees to be paid by the students. The taxability of such fees may be considered zero-rated as this is paid by students enrolled in the institution.

However, an important to note here is that where such registration fees is not paid back to the student when he leaves the school,

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