Exempt from GST: Following the GST Council’s decision to exempt central and state-governed higher education institutions from settling GST on their research funding, notices issued to some prominent institutions, including IIT-Delhi, Anna University, and Punjab University, concerning their outstanding GST pays will no longer be sought out.
The Goods and Services Tax (GST) Council, in its 54th meeting on Monday, resolved to exempt universities and research centers run by the central or state governments, as well as those exempt from income tax, from paying GST on research funding. The exemption applies to research money received from both the government and the commercial sector. Until the above, they had to pay 18% GST on their research grant.
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These institutes claim that the move represents a significant step toward reducing budgetary strains, allowing them to focus more on innovation and high-impact research activities. They do, however, point out that there is still tremendous room for flexibility in other areas, such as college fees, particularly those at private colleges.
“The recent exemption of GST on research grants in educational institutions has been broadly welcomed within the academic community… Reducing the tax burden allows institutions to invest with greater confidence in potentially groundbreaking and risky projects,” Bhuvnesh Kumar, dean of research at Sharda University was quoted as saying.
Kumar noted that the removal of GST from college costs will benefit students. Eliminating this tax would reduce financial pressures for students and educational institutions. He noted that eliminating the GST on food and accommodation bills will significantly decrease the financial strain on students and their families.
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The ruling comes a month after the Directorate General of Goods and Services Tax Intelligence issued show-cause orders to many educational institutions across the country for failing to pay GST on research funding received.
While IIT-Delhi received a Rs 120 crore warning, Tamil Nadu’s Anna University received a Rs 36 crore notice for research money received between 2017-18 and 2021-22. Following this, the Union Ministry of Education stepped in and commenced talks with the Ministry of Finance.
According to Department of Revenue officials, the GST Council’s decision will consider previous instances ‘as is, where is’. Nonetheless, educationists argue that, while exemption would undoubtedly foster scientific temper and increase research and development, it would provide an unusual obstacle to privately run colleges.
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Exempting research organizations and universities from claiming input tax credits on grant purchases will result in increased operational costs for their research projects. Furthermore, these organizations would face challenges with tax compliance and record keeping.
The GST Council recently announced tax reductions on a variety of goods and services, including cancer treatments and helicopter trips. Following the council meeting, Union Finance Minister Nirmala Sitharaman stated that the lower rates will apply prospectively.
In Budget 2024, Sitharaman proposed a record Rs 1.20 lakh crore for education. However, the allocated amount for FY25 is Rs 9,091 crore less than the updated estimate for 2023-24, representing a nearly 7.26 percent reduction from the prior revised estimates of Rs 1,29,718 crore.
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The Indian Institutes of Technology, the government-run public technical establishment, received Rs 10,324 crore for FY25, compared to Rs 9,661 money in the BE for FY24, which was then amended to Rs 10,384 crore.
The allocation to the University Grants Commission (UGC), the higher education regulatory agency, was lowered to Rs 2,500 crore. Last year, UGC was allocated Rs 5,360 crore, which was later increased to Rs 6,409 crore.
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