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. Education has been a fundamental right since the Right of Children to Free and Compulsory Education Act was passed by the Parliament in 2009. Almost 4% of the GDP is spent for educating India’s hidden talent out of which 50% of the amount is spent for primary education alone. With GST being implemented across India from 1st July 2017, let us have a quick understanding of the impact of GST in education industry.
- Base rate for most of the goods & services is set at 18%, while institutes are exempt from the same, as mentioned later.
- The GST on coloring books, exercise books, notebooks, crayons is 12 per cent whereas for pens and school bags, it is18 per cent.
- The coaching institutions for competitive exams will face a major impact as the GST is set at 18 per cent for them.
- Major impact on students will be due to taxing of coaching fees. Till now, students who enroll in coaching institutions for getting into professional courses such as engineering, paid 15% service tax. The new GST levy will now be 18%.
- Tax on non-conventional courses, certificate courses and training programmes Increased from 14% to 18%.
- Most educational institutions buy services like security, transportation, catering and housekeeping from third-party service providers. These will now attract 18% GST, which will reflect in higher fees.
- Services such as transportation of students, catering and security provided to institutions from pre-school to higher secondary or equivalent were exempted from the service tax. The institutions of higher education had to pay tax on these services. Students will also have to pay more for laundry, food in hostel mess, medicine, stationary and other services and products they buy on the campus. Tax on such services was withdrawn in 2012 till April 2017 after which these used to attract a charge of 3 per cent. All such services will now attract a levy of 18 percent.
Some of the services that are exempt from the GST as per the GST Act are as follows:-
- Services provided by the training providers (Project implementation agencies) under Deen Dayal Upadhayaya training courses certified by National Council for Vocational Training.
- Services of assessing bodies empanelled centrally by Directorate General of Training Ministry of skill Development and Entrepreneurship by way of assessments under skill Development initiative Scheme.
- Services by way of training activities relating to arts or culture or sports by charitable entities registered under section 12AA of Income Act, 1961
- 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 Executive Development Programme:-
- Two-year full time residential Post Graduate Programmes 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 Programme in Management
- Five year integrated Programme in Management
- Services provided by an educational institution to its students, faculty and staff;to an educational institution, by way of:-
- Transportation of students, faculty and staff
- Catering, including any mid-day meals scheme sponsored by the Government
- Services relating to admission to, or conduct of examination by, such institution
- Security or cleaning or house-keeping services performed in such educational institution.
To sum up, though institutes are exempt from GST, the tuitions, coaching & supplementary education services will now have 18% tax, which is going to make education costly as most companies will pass on the burden to the end customers. Do share your thoughts on the same by commenting on our social media pages.