Taxation of Education Sector under GST Regime
Education is a social activity which involves facilitation of learning, or the acquisition of knowledge, skills, values, beliefs, and habits. As per Apex Court decision in “Loka Shikshana Trust v/s CIT”, education has been defined as the process of training and developing knowledge, skill and character of students by normal schooling. It is the basic need of every child. It has been considered as a fundamental right by the constitution of this country. The 86th Amendment, 2002 of the constitution inserted Article 21 A, “to provide free and compulsory education of all children in the age group of six to fourteen years as a Fundamental Right in such a manner as the State may, by law, determine.”
Taxing the Education Sector is a sensitive issue. As to promote education in India, it is beneficial if educational services are exempted from tax. However, in the past many decades, people commercialize education sector. People consider it as a business activity, a source of generating huge revenue. According to the GST Act, Educational Institution means an institution providing services by way of
- specialized and
- other educational & support services.
The GST Act tries to maintain a balance. Core educational services provided and received by educational institutions are exempt. Other services are sought to be taxed at the standard rate of 18%. Following are the rates applicable as per the type of service offered-
Description of service
|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 Central Government, State Government or Union territory
(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 entry (b) shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent
|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 programme : –
(a) two year full time 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 the Indian Institute of Management;
(b) fellow programme in Management;
(c) five year integrated programme in Management.
(d) All long duration programs (one year or more) conferring degree/ diploma as recommended including one- year Post Graduate Programs for Executives. Except All short duration executive development programs or need based specially designed programs (less than one year) which are not a qualification recognized by law.
|Technical aids for education, rehabilitation, vocational training and employment of the blind such as Braille typewriters, braille watches, teaching and learning aids, games and other instruments and vocational aids specifically adapted for use of the blindBraille instruments, paper etc.||5%
|Instruments, apparatus and models, designed for demonstrational purposes (for example, in education or exhibitions), unsuitable for other uses||18%|
|Private institution and coaching centres do not have any specific curriculum and do not conduct any examination or award any qualification.||18%|
|Distance Education for higher education||18%|
|Other Education Services||18%|
Apart from the above mentioned services, there are educational services that are provided by the charitable trusts that are exempted from tax under Section 12AA of the Income Tax Act. Therefore, if trusts are running schools, colleges or any other educational institutions for providing educational programmes specifically for abandoned, orphans, homeless children, physically or mentally abused persons, prisoners or persons over age of 65 years residing in a rural area, such activities will be considered as charitable and income from such services will be wholly exempt from GST.
Also there are certain services that are coupled with other services like Boarding schools provide service of education along with other services like providing dwelling units for residence and food. In such cases, if the charges for education and boarding are inseparable, their taxability will be determined as per Section 2(30) read with section 8 of the CGST Act, 2017.
If such services in the case of boarding schools are naturally bundled and supplied in the ordinary course of business. Then the bundle of services will be treated as consisting entirely of the principal supply, which means the service which forms the predominant element of such a bundle. In such cases, the predominant nature is determined by the service of education, the other service of providing residential dwelling will not be considered for the purpose of determining the tax liability and in this case the entire consideration for the supply will be exempt.
Thus, knowing for a fact that education is the basic fundamental right of every child and it forms the basic building block of economic and social development of a country, every attempt has been made by the GST Act to keep core educational services exempt from tax. Other auxiliary education services have been kept under different rates, but overall government has tried to ensure that education remains affordable to every person of this country.
The author of above article is Tanuja Puri, Assistant Professor.
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