What is GST?
Goods and Services Tax (India), It is an indirect tax introduced in India on July 01, 2017. It is applicable all across the country and has replaced various multiple national and International taxes. A Single common Goods and Services Tax was proposed and given approval in 1999 by then prime minister Shri Atal Bihari Vajpayee and his economic advisory panel.Under GST, goods and services are taxed at the rates of 0%, 5%, 12%,18% and 28%. In the GST regime, the goods and services are to be taxed at the same rate. However, on the inter-state sale of goods, there will be 1% additional tax. The impact on common people as well as Government will depend on the Revenue Neutral Rate (RNR) decided by the Government.
GST and EDUCATION:
GST latest news is being lapped up by all sectors of the economy because of the far-reaching effects it may have. The Education sector is also not left untouched. The aforementioned industry of our country is undoubtedly one of the largest worldwide. Our country has more than 1.4 million schools where more than 227 million students are enrolled. The country also hosts more than 36,000 higher Educational Institutions. The Government encourages for further development in the academic curriculum incessantly. The distance learning market in India is also growing exponentially.
The Education sector in India can be divided into two broad categories. One is the Education provided by the public sector and the other is a private sector where both are controlled by central, state or local. The ratio of public schools to private schools in India is 7:5. The country also provides free and compulsory Education till the age of 14 in the government schools.
It is the country’s moral responsibility to provide quality Education to all at low cost. And therefore, along with the healthcare industry, this industry is also kept in either the zero or minimum tax bracket as the current news says. However, private higher secondary schools might be an exception.
There is a lot of clarity which is still to come as far as this industry is concerned. But as per the latest news, GST Council has continued to keep Education in the exemption list with the conditions applied. Government controlled institutions will not be taxable. The Education from pre-school to higher secondary that provides a recognized qualification status to the student and only approved vocational course will be exempted. This news also specifies that the Education services provided by the Institute to the students and faculty, transportation services, catering, midday meals, security, cleaning, will remain tax-free. Sports by charitable organizations and services by National Skill Development Corporation (NSDC) under the MSME Registration will also be tax-free. However, the charitable supplies like food or musical instruments uniform, stationary, and other non-academic supplies will be taxable.
According to the GST news, the services to Higher Education institutions are not free from it. The institutes that provide higher Education will have to pay service tax. Private Education will also incur GST and most likely will be taxed at the lowest slab of 5% under the Goods and Services Tax law. The rate of tax and the allowance of input tax credit or ITC could moderate the impact of taxes but an increase in the cost of Education to the students is likely to be at least 2% to 3%.
The vocational training is also exempted from the GST as the news confirms. But training or coaching institutes will have to bear the taxes because the training institutes do not give a recognized qualification. The rate of taxation is expected to range somewhere around 12% to 18% as compared to the existing 15%, the exact rate is difficult to be derived from the variety of the services offered is huge.
Hence, it can be concluded from the latest GST news, that the new tax regime presents a mixed bag for the Education sector. The clarity on scholarships and discounts is yet to come. Their administrative job is going to become tedious after GST as the GST latest news points out. Every coaching will have to register state wise even if they have several franchise branches in many states of the country, which calls for the separate registration for every state. They will have to file more returns per year which will be quite a cumbersome job to them. Talking about the positive side, the process of taking ITC or input tax credit will become simpler after GST implementation.
Private coaching classes are not covered under the definition of Educational services as per GST Act.
(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 housekeeping services performed in such Educational institution;
(iv) services relating to admission to, or conduct of examination by, such institution up to higher secondary.
Provided that nothing contained in clause (b) of this entry shall apply to an Educational Institution other until an institution providing services by way of pre-school or Education up to higher secondary school or equivalent.