GST exempts education, but not training and coaching services

In the advancement of a progressive economy, education plays the vital role. How a country with comprehensive education nurtures its generations decides the progress of that particular country. In India both public and private sector are engaged in providing education to the youth so as to enhance both creativity and productivity for its population.

Many of us are not aware but it’s a fact not to be denied that the Indian government spends a lot of its earnings on the education sector, especially the primary education. Say on an average if 4% of GDP has been kept aside for the progress of education in India by the government then fifty percent i.e. 2% of the 4% is allocated to the primary education.

Goods And Service Tax (GST) And the Council

When the Goods and Service Tax (GST) was rolled out last year in the month of August, it was launched with an aim to replace all the indirect taxes levied on goods and services by the Centre and States and implement GST by April 2017. Since its launch many experts were watching closely the impact of GST laws and their introduction on the education sector. This is so because till date the educational sector is totally exempted from service tax.

Arun Jaitley
Union Finance Minister Arun Jaitley is heading the Council with representatives from all states.

The GST Council, headed by Union Finance Minister Arun Jaitley and comprising representatives of all states, is scheduled to meet in Srinagar on May 18-19 to decide on rates various good and services will be charged in the new indirect tax regime that is being targeted for rollout from July 1.

Goods and Service Tax (GST) is a destination based consumption tax which is a levy of tax on all goods and services with the objective of expanding the tax base through wide coverage of economic activities, reduction of exemptions, mitigating the cascading effect and enable better compliances etc. thereby resulting into formation of common national market for goods and services.

Perhaps when today this thing seems to be so real today in the Indian context, then kudos to the thoughtful leaders of India reigning the Centre. For they have spared the education sector all along from levy of taxes considering the importance of the same for the country. Not only the education but also the healthcare, pilgrimage, and transport the Centre will also pitch to keep concessional rate at the current level.

As per the present scenario, the education is one of the biggest priorities of the Indian government and has been allowed relief in both direct and indirect taxes. If the indirect taxes are taken into consideration, education is considered a service and as such it is subjected to service tax. But NO INDIRECT tax is levied. For the purpose of service tax, education has been distinguished from coaching or training which facilitates the education.

At present, the educational services are not levied any service tax and under the section 66D(i) it is the “Negative List”. Section 66D(i) defines the delivery of education as part of the curriculum that has been prescribed to obtain a qualification as defined by law. Even the degree courses offered by the colleges, institutions and universities to obtain a qualification are also in the Negative List. Similarly, the vocational training is also out of the net tax. But the training imparted by the coaching institutes shall be covered in this exclusion for it does not lead to grant of any recognised qualification.

The present rate of service tax is 15% including cesses viz Swachh Bharat Cess (SBC) and Krishi Kalyan Cess (KKC).

What Will Happen In The GST Regime?

The things will go on as it is, means that the education sector is still exempted from the service tax whereas all services in relation to coaching and training would be subject to levy of GST as the scope of ‘service’ is very wide. However, the rates are expected to be in the range of 18-20%.

GST Bill
To which extent the coaching centres and training providers operating in the country will be under GST, wait on to the meet in May for clarity on the issue.

GST has to be paid by taxable persons (Section 9 of Model GST law stipulates that the Central Government, a State Government or any local authority is under the category of taxable person as per schedule IV) on the supply of goods and services. Clause 3 of Schedule IV clearly defines that services provided by Government or local authority or a governmental authority by way of education shall not be regarded as a taxable person.

This means, the exemption may be restricted to activities or transactions done by Central Government, State Government or any Local Authority. Therefore it also appears that education services provided by Government are not taxable. In the proposed law, there are no set rules and provisions for inclusions or exclusions of coaching and training services or any other activity related to education.

Based on the provisions of Model Law, it can be said that education sector under the GST regime will be impacted both positively and negatively. When the GST will come into effect, tax component will surely increase by 3-5% thus increasing the cost of services for the end user – the student.

Moreover, even the education and coaching institutes should be zero-rated and be exempted from Goods and Services Tax to lessen the financial burden on parents as well as students. This will not only help in improving the quality of education students and their life but will also help in helping India to be the top economic powers of the world by 2030, given its demographic strength.

Hopefully, GST will be bliss for the education sector, and in order to provide real benefit to the education sector the total cost of education should remain as lower as it is today.

With inputs from [The Hindu].


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