Education Sector Dodges GST’s Impact

The Goods and Service Tax (GST) will subsume all taxes under one category in an attempt to streamline the taxation system in India. Education is the primary requirement of a nation and is considered a priority for the growth and development of society. To promote maximum advancement, the Government has provided tax relief for the education sector as of now. However, as education is a service, it is only subject to Service Tax; no other Direct or Indirect taxes are levied on it. Let’s take a deeper dive to understand the implications of GST on the education matrix.

What is the present tax status of educational services?
At present, Service tax is not imposed on educational services that are in the ‘Negative List’. The ‘Negative List’ consists of:

• Educational services that are ‘a part’ of the curriculum stipulated to acquire a degree or a qualification recognised by the Law.
• Degree courses conducted by colleges, universities or institutions to achieve a qualification sanctioned by Law.
• Vocational training for skill development.

However, coaching or training related services that feed educational needs have been classified separately from the education category. As services pertaining to the educational activities conducted by coaching institutes do not lead to obtaining legally recognised qualifications, these would not be granted tax relief. Nonetheless, they can be subjected to tax exemption under Entry 9 and 9A.

What proposed GST Law is applicable for the education sector?
As per the proposed GST Law, the educational services that have been exempted from GST are:

Services provided:

(a) by an educational institution to its students, faculty and staff;

(b) to an educational institution, by way of,-

• i.transportation of students, faculty and staff;
• ii.catering, including any mid-day meals scheme sponsored by the Government;
• iii.security or cleaning or house-keeping services performed in such educational institution;
• iv.services relating to admission to, or conduct of examination by, such institution “

Exception
However, the condition applied in this regard cannot be overlooked. According to the GST exemption category for educational and training services, there is clear mention of exemption of GST only for services catering to pre-school till higher secondary education.

This is provided that nothing contained in clause (b) of this entry shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent.

As colleges and other higher educational institutes have not been mentioned in the exemption list, we can assume that the tax levied on the services rendered by them would be at 18%. Again, all Government institutions and services would be excluded from GST. For example:

Any services provided by:

• i.the National Skill Development Corporation set up by the Government of India;
• ii.a Sector Skill Council approved by the National Skill Development Corporation;
• iii.an assessment agency approved by the Sector Skill Council or the National Skill Development Corporation;
• iv.a training partner approved by the National Skill Development Corporation or the Sector Skill Council in relation to -(a) the National Skill Development Programme implemented by the National Skill Development Corporation; or (b) a vocational skill development course under the National Skill Certification and Monetary Reward Scheme; or (c) any other Scheme implemented by the National Skill Development Corporation.

What is the possible repercussion of GST on Education?
It is gradually becoming evident that basic education or the K-12 education sector will gain from the GST policy as it is definitively excluded from the tax category in the current scenario. Secondly, all Governmental activities/services/initiatives for educational purposes will also receive tax relief. This implies:

• higher education in the private sector will become more expensive
• competition for admissions in government schools/colleges/institutions will increase
• there will be a 3 to 5% of tax hike on the cost of services that will eventually affect the users, that is, common people.

Moreover, the Government did not want to radicalise the entire system in the first season of levying GST and wanted to have ‘a smooth landing’. However, there might be plans for modifications or changes in the offing. We can hope that given the importance of education in our society, the Government will implement appropriate measures to make education at all levels the least burdened and adopt a comprehensive and democratic approach to make the benefits of education available for all.