GST: Impact of Goods And Service Tax on Education Sector
BY: ANIRUDH AGRAWAL
By LAWNN intern: Anirudh Agrawal
Introduction
GST i.e. Goods and Service Tax is the latest landmark constitutional amendment done in the field of indirect taxation. It seeks to replace the existing multiple taxation system and bring a single taxation system in the country. It is limited to indirect taxation system and would not affect any direct taxes. The Goods and Services Tax is governed by the GST Council which is headed by the Finance Minister. It is expected to be implemented from 1st July 2017.
Under the Goods and Services Tax (GST), four tier tax structure has been finalized i.e. of 5%, 12%, 18% and 28% where lower rates will be levied for essential items and higher rates for luxury goods.
The Goods and Services Tax (GST) will replace numerous indirect taxes including Central Excise Duty, Service Tax, Value Added Tax, Luxury Tax, Central Sales Tax, etc.
Impact of GST on Education Sector
Education is one of the most important sector in the Indian economy as it is directly relatable to the advancement of the country.
Education is provided both by the public and private sector. After Right to Education has been recognised as a Fundamental Right, it is the duty of the Government to provide education to all children between the age of six to fourteen years. Thus, it is the primary duty of country becomes to provide education at low cost and make it more accessible to the Indian citizens.
At present, education is considered a service and only subject to the service tax and no other indirect taxes. But, only those services which the government has laid down within educational service will be exempted from service tax.
Educational services are in the ‘Negative list’ and thus are exempted from the subject of service tax by virtue of Section 66D (i) of the Finance Act 1994. It will continue to be exempted in the GST regime as Revenue Secretary Adhia said “Our entire purpose will be that we don’t upset anything that is there now. We will try to do some smooth landing. So we will recommend to GST Council that whatever is the existing exemption list for service tax they should continue because we cannot do too many things at the same time.” Currently, there are 17 items in negative list of services on which service tax is not levied.
However only those services which are related to delivery of education as ‘a part’ of the curriculum that has been prescribed for obtaining a qualification prescribed by law are exempted from service tax. It includes the conduct of degree courses by colleges, universities or institutions which lead to grant of qualifications recognized by law. Similarly, vocational training is also out of subject of taxation.
Therefore training or coaching imparted by coaching institutes would not be covered in this exclusion as such training does not lead to grant of a recognized qualification. Such services are liable to service tax but subject to exemption under Notification No. 25/2012-ST dated 20.06.2012 vide Entry No. 9 and 9A in relation to following services:
Entry 9 states that the services provided by an educational institution OR to an educational institution, by way of transportation of students, faculty and staff OR catering, including any mid-day meals scheme sponsored by the Government OR security or cleaning or house-keeping services performed in such educational institution OR services concerned with the admission, or conduct of examination
9A. Any services provided by the National Skill Development Corporation, Sector Skill Council or an assessment agency approved by the Sector Skill Council or the National Skill Development Corporation, a training partner approved by the National Skill Development Corporation or the Sector Skill Council which is in relation to the National Skill Development Programme, a vocational skill development course provided by the National Skill Certification and Monetary Reward Scheme or any other Scheme implemented by the National Skill Development Corporation.”
The above services as well as following services are exempted from levy of service tax:
- 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 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;
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.
By looking at the above, we can deduce that exemptions are mostly related to the services levied by central government, state government or any local authority.
Conclusion
Though educational services would be exempt from the service tax in the first year of GST implementation but the decision can be reviewed after a year as indicated by the statement of Mr. Adhia who said that the approach for the GST rollout would be to avoid any shock in the first year and any review for inclusion of a service or change in rate could be done in the second or third year of the implementation based on revenue realisation.
Given the important character of education in the role of building nation, the service is rightly exempted from the tax and it thus eliminates the extra financial burden on the parents of students. The objective of providing such tax exemption is to push for maximum literacy with maximum coverage in India.
Anirudh Agrawal is a student pursuing B.A.LL.B from Hidayatullah National Law University, Raipur and is an acquisitive learner and writer.