India Government Denies Education Becoming More Expensive with GST

Terming media reports that education would become more expensive in India under the newly introduced Goods and Services Tax (GST) as “completely unsubstantiated,” the Central Government has stated that there is no change made on any subject relating to education.

“The Central Government denies all such reports that education will become expensive under GST. It states that such reports are completely unsubstantiated. In fact, there is no change made on any subject relating to education in the GST era, except to reduce the tax rate on certain items of education such as school bags etc,” an official statement said.

The fundamental idea of GST is to eliminate the tax on tax in a supply chain and bring all the indirect taxes under one unified tax umbrella enabling a seamless flow of goods and services within the nation. This not only promises to reduce the overall tax burden on the people but is also touted to bring in higher compliance rates due to input tax credits.

GST came into force on July 1, 2017. The basic idea behind the new tax regime is to eliminate the tax on tax in a supply chain and bring all the indirect taxes under one unified tax umbrella enabling a seamless flow of goods and services within the India. The Government says GST would not only reduce the overall tax burden on the people but also lead to higher compliance rates due to input tax credits.

Services provided by an educational institution to students, faculty and staff are exempt. These include pre-school education and education up to higher secondary school or equivalent; education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force; education as a part of an approved vocational education course, the government said.

Transportation of students, faculty and staff services provided to an educational institution (providing pre-school education and education up to higher secondary school or equivalent) are exempt from GST. Similarly, catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory, to an educational institution providing education up to higher secondary school or equivalent, are also exempt from GST, it added.

Security or cleaning or housekeeping services performed in such educational institutions are also exempt from GST. Services relating to admission to, or conducting of examination by, such institutions, up to higher secondary, too are exempt.

Thus, education up to Higher Secondary School level does not suffer GST on output services and also on most of the important input services. Some of the input services like transport, canteen etc. provided by private players to educational institutions were subject to service tax in the pre-GST era and the same is continued in GST regime.

Furthermore, services by an entity registered under section 12AA of the Income-tax Act by way of charitable activities relating to advancement of educational programmes or skill development for (a) abandoned, orphaned or homeless children; (b) physically or mentally abused and traumatized persons; (c) prisoners; (d) persons over the age of 65 years residing in a rural area are also exempt from GST.

Thus, there has been no change in the taxability of educational and other services on account of GST.

Earlier media reports had pointed out that while a relatively lower tax on education-related goods like notebooks and school may give the perception that GST is education-friendly, the tax on third-party services in higher education institutions would hike up expenses on higher education.

These services, including catering, housekeeping, security and transportation – which are sourced from outside – are now taxable at 18 %. There is also an increase in tax for non-traditional courses from 15% to 18%. A tax increase of Rs 40,000 – from Rs 1.4 lakh to Rs 1.8 lakh – for a course where you are paying Rs 10 lakh.

Services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programmes except for Executive Development Programme are also exempt.

These are the Two year full time residential Post Graduate Programs in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT), conducted by Indian Institute of Management, Fellow program in Management and Five year integrated programme in Management.

However, the executive tag put before most of the 1-year MBA programs in India has resulted in those programs not getting the exemption.(Image Source:wikipedia.org)