The Right of Children to Free and Compulsory Education Act of 2009 has made education not only compulsory but has also made the Govt. responsible to provide education at economical rates.
The GST or Goods and Services Tax, that came into effect on July 1st is the biggest tax reform in India that will change the indirect tax landscape of the country, subsuming over a dozen separate central and state taxes.
As per the old regulation, despite being a service, education was kept outside the purview of the service tax laws and similarly post GST implementation, no tax will be levied on services provided by educational institutions from preschools to higher secondary level.
Areas where GST has made a difference
Coaching Institutes
With the fast growing world, educational institutes seem to fall out of place in providing proper education which has led to the coming of training institutes and building a rigid platform for the students. They are playing very important role in today’s competitive world. Previously, the government charged 14% tax on all such educations and now it has increased to 18% which seems to be a factor of disappointment for the students preparing for government exams, IITs, banking, and other professional courses.
The impact of GST is evidently visible on each and every business in India. In Education and Training Industry, India holds an important place in the global education industry. The country has more than 1.4 million schools with over 227 million students enrolled and more than 36,000 higher education institutes. India has one of the largest higher education systems in the world. However, there is still a lot of potential for further development in the education system. India has become the second largest market for e-learning after the US.
Private Education
Unlike other segments, the education provided by the private school from preschool to higher secondary is exempted under GST.
Apart from the exemption, one should also divert towards the fact that the education provided by the private institutions is currently grabbing the nation on a fast pace will likely to get expensive up to 3 or 5 percent after the rollout of the new goods and services tax in India. As institutions and universities are not mentioned in the exempted list, it is expected that 18% of GST to be levied on them.
Not surprisingly, the Indians consider private education most preferable and would pay an extra penny to claim it for their children.
The education services provided by the below are also exempted from GST:
1. National Skill Development Corporation set up by the Government of India
2. Sector Skill Councils approved by the National Skill Development Corporation
3. Assessment agencies approved by the Sector Skill Council or the National Skill Development Corporation.
4. Training partners approved by the National Skill Development Corporation or the Sector Skill Council are also included w.r.t the following programs:
- The National Skill Development Programme implemented by the National Skill Development Corporation.
- A vocational skill development course under the National Skill Certification and Monetary Reward Scheme.
- Any other scheme implemented by the National Skill Development Corporation.
How GST will lift the cost of Education?
- All services provided to educational institutions are liable to tax under GST
- Most educational institutions buy services like security, transportation, catering and housekeeping from third-party service providers. These will now attract 18% GST levy, which may reflect in higher fees.
- GST has increased tax on non-conventional courses, certificate courses and training programmes from 14% to 18%. Tests and exams for admission to overseas colleges will also be subject to GST.
- While the new tax regime is slowly getting implemented across education institutions in India, experts believe there might be modifications or changes in the future0
Experts Speak
Bipin Sapra, Partner – Indirect Tax & Regulatory Services at EY says the education sector benefits from lot of exemptions, which are likely to continue under the GST. However, he also hints at a possibility that the taxes paid on input and input services, which currently amount to 6-7 percent, could increase under GST.
Bipin Sapra, Partner – Indirect Tax & Regulatory Services at Ernst & Young India believes that the government should explore the idea of zero tax-rate for the education sector under the Goods and Services Tax (GST).
The Right of Children to Free and Compulsory Education Act of 2009 has made education not only compulsory but has also made the Govt. responsible to provide education at economical rates.
The GST or Goods and Services Tax, that came into effect on July 1st is the biggest tax reform in India that will change the indirect tax landscape of the country, subsuming over a dozen separate central and state taxes.
As per the old regulation, despite being a service, education was kept outside the purview of the service tax laws and similarly post GST implementation, no tax will be levied on services provided by educational institutions from preschools to higher secondary level.
