Education Sector Under Goods & Service Tax: The Inevitable Impact

Impact of GST on Education

So, how important is education?

Could you answer that in negative? Of course not! While you think education as the rope to reaching a standing living, so does the government. No wonder if I say government sets aside 4% of its GDP for education in India, 50% of which is allocated only for primary education.

That is why, when the government paid attention to all the sectors while structuring its GST regime, how could the education sector be left behind?

Therefore, GST impact on the education sector in India would be obvious and expected. If we talk about the present regime, education is counted as a Service and subject to the levy of service tax. However, academic services fall under the negative list precisely along with

  • Conduct of degree courses by faculties, universities, establishments
  • Grant of recognised qualifications
  • Vocational education

However, coaching institutes fall under the purview of Service Tax as it does not grant any recognised qualification. For being out of the tax web and gaining exemption they have to fall under Notification No. 25/2012-ST dated 20/6/2012.

To be elaborate, Services exempted under Notification No. 25/2012-ST dated 20/6/2012 vide entry no 9 and 9A are:

Under Entry 9:

  1. Service provided by an educational institution to its students, staff, and faculty
  2. Service provided to an educational institute in the way of
  • Transportation services to educational institute
  • Catering (including Mid-Day Meal) to institute
  • House-keeping, cleaning, security services to educational institute
  • Institutions providing services of conducting admission or examination for educational institutes

Under Entry 9A:

Service provided by-

I. A Sector Skill Council approved by the National Skill Development Corporation

II. National Skill Development Corporation set up by the Government of India

III. An agency recommended by Sector Skill Council or National Skill Development Corporation

IV. Training partner recommended by National Skill Development Corporation or Sector Skill Council in concern to-

  • Vocational skill development course under National Skill Certification and Monetary Reward Scheme
  • National Skill Development Program implemented by National Skill Development Corporation
  • Other scheme implemented by National Skill Development Corporation

But as GST Law kicks in, it would transform the whole structure. Based on the Model GST Law, the impact of GST on education sector might be compact, having both positive and negative aspects.

  1. GST is going to be levied @18 on coaching institutes while some educational institutions would be exempted from GST.
  1. Valuation of coaching services in terms of discounts, scholarships and concession.

Note: For such service providers, registration in each state they are operating is compulsory.

  1. Proper outward and inward supplies’ receipts shall be mandatory.
  1. Number of returns to be filed would increase.
  1. Seamless and easy availing of input tax credit.

Although, this biggest tax reform builds for a promising future but the immediate effects of GST on education sector sheds light on the burden over students. To curb this, seamless credit across the chain should be made available so that the standard education doesn’t leave a hole in the common man’s pocket.


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