Impact of GST on Education Sector, GST Rates in Education Sector

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Impact of GST on Education Sector, GST Rates in Education Sector: Education is the primary requirement of a nation acts as weapon in itself for any country and its growth and development of economy. Since education is a service, so it attracts service tax as per old laws. As per service tax laws, education sector was kept out of service tax net as mentioned in negative list. Education and Training industry is important place in Indian economy.GST law will also impact on Education and Training industry. Now check GST Impact on Education Sector and GST Rates on Education Industry…

Impact of GST on Education Sector, GST Rates

GST Rates in Education Sector

Education things are Cheaper but service expensive
 ParticularsCurrentGSTDifference (%)
Children’s Color book000
Stapler, pencil, sharpener18.6812-6.68
School Bag12.518+5.5
Fountain pen, Nib18.1318-.13
Refill18.6918-.69
Exercise Book18.6812-6.68
Ball pen18.6812-6.68

For coaching fees, instead of 15%, 18% tax will be charged – the education is out of GST to say. But only in case of school-college fees. There was a 15% service tax on non-conventional courses and coaching classes. Now 18% tax will be charged. Eating and drinking services in the hostel will also be expensive.

What is Education?

  • “Education” is not defined in the GST Act
  • As per Apex Court decision in “Loka Shikshana Trust v/s CIT”,
  • Education is process of training and developing knowledge, skill and character of students by normal schooling.
  • Education Services are classified in heading 9992 (as per Notification No. 11/2017-Central Tax (Rate)) and are further sub-divided into six groups (as per the Annexure to the same notification) comprising of Pre-primary, primary, secondary, higher, specialised and other educational & support services
Impact of GST on Education Sector, GST Rates in Education Sector

GST Impact on Education

  • Education is more a social activity rather than a business one.
  • The government has a constitutional obligation to provide free and compulsory elementary education to every child.
  • Thus, to promote education, it would be beneficial if educational services are exempted from tax
  • GST Act tries to maintain a fine balance whereby core educational services provided and received by educational institutions are exempt and other services are sought to be taxed at the standard rate of 18%

As per the proposed GST Law, the educational services that have been exempted from GST are:

Rates of GST on education services

Services provided by an educational institution to students, faculty and staff are exempt.

“Educational Institution” means an institution providing services by way of:

  • (i) Pre-school education and education up to higher secondary school or equivalent;
  • (ii) Education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;
  • (iii) Education as a part of an approved vocational education course.

Services provided:

(a) By an educational institution to its students, faculty and staff;

(b) To an educational institution, by way of–

  • (i) Transportation of students, faculty and staff;
  • (ii) Catering, including any mid-day meals scheme sponsored by the Government;
  • (iii) Security or cleaning or house-keeping services performed in such   educational institution;
  • (iv) Services relating to admission to, or conduct of examination by, such       institution; up to higher secondary.

(c) Services provided by The Indian Institute of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programmes, except Executive Development Programme:

  • (i) A 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 Aptitude Test (CAT), conducted by the Indian Institute of Management;
  • (ii) Fellow Program in Management;
  • (iii) five-year integrated program in Management;

(d) Further, any service provided by–

  • (i) The national Skill Development Corporation set up by the Government of India;
  • (ii) A Sector Skill Council approved by National Skill Development Corporation;
  • (iii) An assessment agency approved by Sector Skill or National Skill Development Corporation;
  • (iv) A training partner approved by National Skill Development Corporation or sector skill services. However GST will only be exempt from services related to catering to pre-school till higher secondary education. As colleges and other higher educational institutes are not mentioned in the exemption list, so they are likely to be levied at 18%.

Post GST implementation no tax would be levied on services provided by educational institutions from preschools to higher secondary level. Although services provided by higher educational institutions are not taxed, services to those institutions are liable to tax under GST.As school education, from preschool to higher secondary has been kept out from GST, governmet will still keep tuition fees, stationary & text books cost low.

GST on colouring books are nil and on exercise books, notebooks, and crayons will be at 12% and pens & schools bags will be at 18%. However coaching institutions set up for providing services related to competitive exams will face GST upto 18%.

Clause 3 of Schedule IV to the act specifically provides that services rendered by a Government or local authority or a governmental authority by way of education shall not be regarded as a taxable person.

  • Further, ‘education services’ have been defined in the said Schedule IV which means services by way of –
  • (i) Pre-school education and education up to higher secondary school or equivalent;
  • (ii) Education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force; or
  • (iii) Education as a part of an approved vocational education course.

Thus, the exemption may be restricted to activities or transactions done by Central Government, State Government or any Local Authority. It, consequently, appears that education services provided by Government will not be taxable. There are no specific provisions for inclusions or exclusions of coaching and training services or any other activity allied to education elsewhere in the proposed law.

There seems to be concerns in valuation of coaching services in opinion of the industry practice of discounts / concessions / scholarship. The proposed valuation rules are different from the existing ones and as such coaching institutes need to frame an appropriate policy for such discounts in advance making it a part of documentation.

Following services are not exempted from GST-

  • Services or supplies provided by third parties like academic instruments, computers, sports, equipment, etc.
  • Activities offered by third parties after school hours.
  • Food and accommodation provided for excursion.
  • Non-academic related supplies provided like stationary, bags, uniforms, etc.

Certain services rendered by the Indian Institutes of Management are also relieved, like the two-year full-time residential Post Graduate Programmes in Management, to which admissions are made on the basis of Common Admission Test (CAT), Fellow programme in Management; Five-year integrated programme in Management, 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 and, finally, all services provided by NSDC. Services of assessing bodies empanelled centrally by Directorate General of Training, and the Ministry of Skill Development and Entrepreneurship, that fall under the Skill Development Initiative (SDI) Scheme have also been exempted.

Written By: Amit Khiyani (CA, LCS, IFRS, BCom)

Contact: khiyaniamit88@gmail.com

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