Service

Knowledge BaseForeign Education Consultants - Supreme Court and GST Council

Download PPT

 

5th September, 2025

Foreign Education Consultants are not subject to GST: Hon’ble Supreme Court & GST Council also recommends amendment in favour

Back Ground

Foreign Education Consultants (FECs) are providing their services to foreign universities to get the Indian students for their various education programs. FECs receives their consideration from foreign university in Foreign Currency. Since service tax era, government is disputing their eligibility of service as “export of service” and demanding service tax and GST thereon even if they are earning in foreign currency. Long standing dispute is now finally settled by the Hon’ble Supreme Court recently. Similarly, recently, GST council has also recommended to amend the GST law in favour of FECs. This write up will help the FECs and their tax consultants to understand the recent changes and its impact and actions to be taken.

Impact of the Judgment, GST is not payable

  • On 25/08/2025, Hon’ble Supreme Court have dismissed Petions* filed by the government. This petition was filed against the judgement@ of the Hon’ble Bombay High Court, Nagpur in which it was held that Foreign Education Consultants are not “intermediary” and hence not liable to pay GST, if consideration is received in foreign currency. Thus, view of Hon’ble High Court is now confirmed by Hon’ble Supreme Court and long fought dispute is finally settled by the highest court in favour of the FECs.
  • In many cases, GST demands are raised on FECs if they have not paid GST. In all such cases, it will be a great relief to the FECs.
  • Many of such consultants are paying GST on such services to avoid the risk of exorbitant penalties, interest and cost of litigation. As Foreign Universities don’t pay them GST over and above agreed fees, FECs have to pay GST out of their own pocket. Now, after such judgment of the Hon’ble Supreme Court, they have sufficient reason to believe that GST is not payable and may decide to stop paying it further.

Lodge Refund Claim of Taxes If Already Paid

  • Many of such consultants were paying GST. Now, FECs can claim the refund of taxes they have already paid. Many of them were paying IGST considering such services as export of services and claiming refunds of IGST, and such refunds were being denied by the department on the ground that there is no “export of service” and GST is payable.
  • GST law prescribes time limit of two years for claiming the refund. Department may dispute the refund beyond such a period and that can be another round of litigation for FECs, if taxpayers prefer to claim such refund beyond period of one year.
  • It is worth noting that time limit of two years for claiming refund may not applicable if such tax is paid under protest.
  • Even if sanctioned, such refund will not be fully refunded in cash. Such refund will be re-credited to Electronic Credit Ledger to the extent it was paid by through Input Tax Credit (ITC) as provided under Rule 92(1A) of the CGST Rules, 2017. To encash such re-credited amount, FECs may opt to go for refund though paying IGST on export of services in future. Till the time, their funds will be blocked. However, GST Council has recently recommended 90% of refund immediately based on some risk assessment.

A Small Amount of Risk

  • Hon’ble Supreme Court has dismissed the department’s petition based on their judgment in the case of Vodafone India Ltd. and confirmed the view of the Hon’ble Bombay High Court in KC Overseas Education Pvt. Ltd. Hon’ble Supreme Court has not found it worth going into the facts of FECs. It is possible that the Government may file a review petition before Hon’ble Supreme Court. If agreed by the Hon’ble Supreme Court, entire case may be again argued in detail and may be decided again.

On 3rd Sept. 25, GST Council Also Recommend Amendment in Law

  • Even if implemented such amendments are not recommended to be implemented retrospectively meaning thereby, once implemented, it will be implemented prospectively only. Hence, such amendment may not be helpful for the past period and for past period, FECs may have to rely on the judgment by the Hon’ble Supreme Court.

Such Amendment May Not be Available in Recent Future

  • Such amendment can be done only through amendment in the IGST Act, 2017 which can be done by the passing law in the Parliament. Hence, such amendment can be expected only in the Budget 2026 and relief may be available for period once such amended provisions will be notified by the Government. Hence, till such amendment are made applicable, FECs have to rely on the judgment of Hon’ble Supreme Court if they decide not to pay GST. In short till the time such recommendation of the GST Council is implemented, FECs are not required to pay GST based on the Judgment of the Hon’ble Supreme Court and after that they will not be required to pay GST based on the amended law itself.

Sub-Consultants Services are Still Subject to GST and Impact on FECs

  • It is worth noting that relief of not paying GST to FECs is available only if consideration is received in Foreign Exchange. If such transaction is between two Indian consultants (FECs & their sub-consultant), such relief is not available, and sub-consultants are required to charge GST on consideration received from Indian FECs in Indian Rupees. It will be so even if recommendations of the GST Council are accepted and law is amended.
  • However, now, FECs can claim refund of ITC of the tax charged by their sub-consultants to them and hence it may not be additional cost for FECs and FECs may agree to pay GST to sub-agents over and above agreed fees. FECs will require to bear burden of blockage of funds to that extent and pain and cost of claiming refunds regularly.
  • It is also learnt that some FECs has preferred to move their operations to the SEZ. If so, sub-consultants may supply their services to such FECs without payment of GST under LUT.
  • If sub-consultants are doing their business through FECs located in SEZ for authorised operations, they are not required to charge GST and if they are doing their business through a non-SEZ FECs, they are required to charge GST but such non-SEZ FECs can reimburse such GST and claim refund of such GST paid to such sub-consultants. Thus, there will be level playing ground for both FECs i.e. located in SEZ and not located in SEZ.

 

* SLA(C)Nos.21104-21105/2025 The UOI V/s KC Overseas Education Pvt. Ltd.

@ dated 03-03-2025 in WP No. 3914/2024 KC Overseas Education Pvt. Ltd. V/s. UOI & Ors.