Goods and Services Tax (GST) on Education Sector – a Curse or Blessing

‘A cold day in July’ – though this saying is more than centuries old, the 1^stof July 2017 made it evident for each and every Indian citizen! It was the day when the Government of India took a step forward and passed the GST (Goods and Services Tax) bill. And like always, there were much speculations and presumptions about GST; it will increase the cost of living, it will affect the present economic balance, and what not!

However, with the Government of India implementing Goods and Services Tax, the education sector also underwent an array of changes and cost-fluctuations. What are these changes, how will they affect education domain,will education be same as it was till the 30^thof June or will turn better? Let’s find out the answers to these questions while decoding the pros and cons of Goods and Services Tax. In other words, let’s find out whether GST is a curse or blessing for the Indian Education Sector.

What is ‘GST’?

1. The Press Information Bureau defines GST as a single tax on the overall supply of goods and services available or applicable in India. Starting with the manufacturers, this newly introduced tax will be levied on the customers and end-consumers.
2. GST is a location or destination-based tax; it will be collected by the state where the products are being bought, used or consumed. The state where the goods are being produced will be exempted from GST.
3. GST is divided into four different slabs: 5%, 12%, 18% and 28%. To note here, if any of the tax rates exceed one slab, it will come under the next slab. E.g.: tax rate of 6-11% will come under the slab of 12%, tax rate of 13-17% will come under 18% slab, and tax rate of 19-27% will come under the slab of 28%.
4. GST is targeted to replace the multiple indirect taxes. Owing to this, tax payers can expect an overall reduction of tax imposed on daily commodities, and bring in a sigh of relief among the end consumers.

Effects of Goods and Services Tax– Who Will be Exempted form GST?

According to the Central Board of Excise and Customs (CBEC), the following services will be exempted from GST:

1. Services provided by an educational institution to its students, faculty and staff.
2. Services provided to an educational institution, by way of transportation of students, faculty and staff; catering, including any mid-day meals scheme sponsored by the government; security or cleaning or housekeeping services performed in such educational institution; services relating to admission to, or conduct of examination by, such institution; up to higher secondary.
3. Services provided by the Indian Institutes of Management (IIM), 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 based on Common Admission Test (CAT), conducted by Indian Institute of Management;
• Fellow programme in Management;
• Five-year integrated programme in Management.

4. Services by way of training or coaching in recreational activities relating to-

• Arts or culture.
• Sports by charitable entities registered under Section 12AA of Income Tax Act, 1961.

5. And, lastly, any services provided by:

• The National Skill Development Corporation set up by Government of India;
• A Sector Skill Council approved by National Skill Development Corporation;
• An assessment agency approved by Sector Skill Council or National Skill Development Corporation;
• A training partner approved by National Skill Development Corporation or Sector Skill Services Council in relation to National Skill Development Programme implemented by the National Skill Development Corporation; or a vocational skill development course under National Skill Certification and Monetary Reward Scheme; or any other Scheme implemented by National Skill Development Corporation.

Positive Effects of GST on Education:

• Pre-schools and schools would not be affected by the implementation of Goods and Services Tax. Under both these categories, students will be able to get tax-free education.
• Traditional courses like Bachelor of Arts (B.A.), Bachelor of Commerce (B.Com.), Master of Arts (M.A.), Master of Commerce (M.Com.), Master of Science-Maths, B.L.I.Sc., M.L.I.Sc., Master of Social Work (MSW), Master of Law (LL.M.), etc will be exempted from GST.

Negative Effects of GST on Education:

1. With the imposition of Goods and Services Tax, the cost of stationary items will shoot up by a remarkable margin which in turn will affect students severely.
2. Cost of foods within the campus and other on-campus products will also increase.
3. For students opting for college hostels, they should bear around 18% rise in essentials like laundry, hostel fees, hostel mess food, and other related commodities.To note here, starting from 2012, there were no taxes on these services till April 2017.
4. While traditional courses will be exempted, other non-conventional courses, certificate courses and other training programmes will be levied with 18% tax which was previously 14%.
5. With the implementation of GST, coaching class fees will go up by a minimum of 3% hike; for a fee of INR 10,000, students will be levied with a tax of INR 300.
6. For professional courses like MMBS, B.E., etc., there will be a hike of annual 4% tax. As a result, the previous tax of 14% will rise to 18%.
7. Educational institutions will be levied with 18% tax while buying services from any third party. These services include security within the premises, housekeeping, transportation, catering, etc.
8. For any education-related events or meets organised by any foreign sources, a GST of 12-18% will be levied.

To Understand Better:

1. If the annual hostel and other convenient fee is around INR 1L:

• Tax before July 1^st, 2017: INR 3,000
• Tax after July 1^st, 2017: INR 15,000

2. If the annual fee for coaching classes (engineering, medical and others) is INR 1L:

• Tax before July 1^st, 2017: 15%; students had to pay INR 1,15,000
• Tax after July 1^st, 2017: 18%; students must pay INR 1,18,000

3. If the annual fee for any professional course is INR 10L:

• Tax to be paid before July 1^st, 2017: INR 1,40,000
• Tax to be paid after July 1^st, 2017: INR 1,80,000

Parental Tips to Cease the Effects of GST:

1. Determine the major short-term, mid-term and long-term educational expenses for your children.
2. Once the expenses are decided accordingly, make sure you plan ways to achieve them over the course.
3. Usually, the long-term goals would require a hefty investment. To reduce these expenses, you must select proper career options for your children.
4. Even though in lesser amounts, make sure you save every month. In the long run, these savings can sum up to a remarkable amount.

Summing up all these changes, it can be easily concluded that in addition to the students, even their parents will also undergo an added amount of pressure due to GST. However, it will be too early to pin down any assumptions until the system runs for some time.

In case, you are still confused about the probable impacts of GST on education sector, you can write to us at support@edqart.com or call us at +91-80-8846-8846. Also, visit www.edqart.com for more information.

(Edvantage Point is India’s go-to platform for related products and services. We are into admissions management for schools, career advice and counselling services for students as well as recruitment services).