The GST effect
Talk is that GST has exempted the Education sector from tax liabilities. However, a closer look reveals that not everything is tax insulated, says Beas Dev Ralhan
With Goods and Services Tax (GST) coming into force from July 1, 2017, India is undergoing the biggest tax reform ever but the Education sector will get affected by it only marginally. A country’s all-round development and progress is largely dependent on the quality of education its youth are empowered with. Thus, Education has always been excluded from the levy of Service Tax. Under Section 66 D of the Finance Act, 1994, the Education sector has been enjoying tax exemptions much before GST came in.
The GST continues to exempt education from most tax liabilities and the sector continues to enjoy benefits accruing from that. However, a closer look reveals that not everything in Education is tax insulated. Here’s a list of areas that will enjoy tax exemption and those that won’t.
The K-12 sector
As per the Goods and Services Tax (GST) Bill, tax will not be levied on curriculum-related services provided by primary and higher educational institutions to obtain a qualification recognised by law. Input services like transportation for students, security and conducting exams, have been exempted for institutes awarding degrees recognised under law. Further, school supplies like bags and books will also enjoy exemption. This is a new addition to the list of exemptions and is expected to reduce parental burden.
However, other supplies indispensable to providing quality education like digital aids, labs and learning apps would be taxed at 18 per cent under the new GST regime. An exemption or at least a tax reduction would have been welcome in this crucial area of learning.
Coaching Centres & Higher Education
Non-conventional courses with shorter duration, like training programmes and certificate courses for working professionals, will be taxed at 18 per cent. As per Online Education in India: 2021, a study published by KPMG and Google last month, the number of those taking these courses is expected to increase substantially. Therefore, it is a smart move by the Government to raise revenue as professionals opt for these courses to upgrade their skills and price sensitivity doesn’t affect the intake.
A couple of higher education courses will enjoy tax exemption. For instance, while an integrated management programme and a regular MBA programme would be exempted from GST, an executive development programme and online programme will not.
Assistance provided by coaching centres to students appearing for medical and engineering entrance examinations will also be taxed at 18 per cent. Students have already requested the Government to provide tax reduction in this regard. Coaching centres will also have to bear taxes for input services. However, with input services getting freely allowed for input tax, irrespective of the tax category, the impact will be minimal.
In view of the anti-profiteering provisions under the GST law, institutes need to figure out the available incremental input tax credit, the benefit of which should be passed on to students.
Training related to art, culture and sports by charitable entities is exempted under GST. Examination and admission fees paid to overseas colleges will, however, be subject to GST. Some of the training organised by foreign-based entities in India would be taxable. However, if the training provided by a foreign body is outside the boundaries of commerce, industry or other businesses, the service will be tax free.
Summing up, while most existing exemptions continue, there will be an increase in the procurement cost, which could make Education cost to go up.
The GST is revolutionary because it is a comprehensive, multi-stage, destination-based tax to be levied on every value addition. It has done away with VAT and Excise duty.
As GST clarifications are still coming out, we need to wait to decide upon the steps so that we can ensure optimum benefits for all the stakeholders in the education sector.
Industries, in general, could be waiting to know the overall impact on prices and cost of production. Registered dealers will be rating the vendors for compliance ratings as proper filing of returns is required from vendors for smooth input credit for buyers.
The seller needs to ensure the same for the buyers. Thus, Enterprise Resource Planning (ERP) systems reconfiguration becomes important for us.
The writer is CEO and co-founder, Next Education India Pvt. Ltd
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