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Understanding The Impact Of GST on the Indian Education Sector

The GST or Goods and Services Tax, that came into effect on July 1st is the biggest tax reform in India that will change the indirect tax landscape of the country, subsuming over a dozen separate central and state taxes.

As per the old regulation, despite being a service, education was kept outside the purview of the service tax laws and similarly post GST implementation, no tax will be levied on services provided by educational institutions from preschools to higher secondary level.

However there are several ways that GST will raise the cost of education.

To start with all services provided to educational institutions are liable to tax under GST. While there is no tax levied on colouring books, but on exercise books, notebooks, and crayons the tax will be at 12% and on stationary like pens and schools bags, the tax will be at 18%.

However, the biggest factor will be the tax on services offered to educational institutions. Most educational institutions buy services like security, transportation, catering and housekeeping from third-party service providers. These will now attract 18% GST levy, which may reflect in higher fees.

Schools that provide additional facilities such as swimming pools, sprawling campus will now be subject to the higher tax because the maintenance of lawns, pools, sports facilities and computer lab etc. will be taxed at the new rate.

Similarly, schools who work with freelance consultants, assistants etc. will also have to consider the GST rates while making a payment to these professionals.

In terms of higher education The GST council has kept traditional courses out of the tax net. But it has increased tax on non-conventional courses, certificate courses and training programmes from 14% to 18%. Tests and exams for admission to overseas colleges will also be subject to GST. Similarly, students enrolling in coaching institutions to get into professional courses such as engineering will have to pay the new GST levy of 18%.

This 18 percent will also be applicable to students living in hostels as they will also have to pay more for laundry, food in hostel mess, medicine, stationery and other services and products they buy on the campus.

While the new tax regime is slowly getting implemented across education institutions in India, experts believe there might be modifications or changes in the future. In a country like India, that has given the utmost importance to education in our society, many hope the Government will adopt a comprehensive and democratic approach to make education at all levels the least burdened.