GST IMPACT ON EDUCATION SECTOR
Introduction
Education and Training industry is important place in Indian economy. GST law will also impact on Education and Training industry.
Presently, Educational services are excluded from the levy of Service Tax and are in ‘Negative List’ under section 66D(i) which are related to delivery of education as ‘a part’ of the curriculum that has been prescribed for obtaining a qualification prescribed by law. Conduct of degree courses by colleges, universities or institutions which lead to grant of qualifications recognized by law are also in negative list. Similarly, vocational training is also out of tax net.
However, training or coaching imparted by coaching institutes would, however, 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. The present rate of service tax is 15% including cesses viz Swachh Bharat Cess (SBC) and Krishi Kalyan Cess (KKC).
Proposed GST Law
According to the GST law which neither contains the exemptions nor the rates of taxation as of now, it appears that all services in relation to coaching and training would be subject to levy of GST as the scope of ‘service’ is very wide. However, the rates are expected to be in the range of 12-18%.
In GST regime, GST shall be payable by taxable persons on the supply of goods and services. Taxable person is defined in GST law which stipulates that the Central Government, a State Government or any local authority shall be regarded as a taxable person in respect of activities or transactions
in which they are engaged as public authorities other than the activities or transactions as specified in the Act.
Further, ‘Education Services’ have been defined in Schedule which means services by way of –
- Pre-school education and education up to higher secondary school or equivalent;
- Education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force; or
- Education as a part of an approved vocational education course.
Hence, the exemption may be restricted to activities or transactions done by Central Government, State Government or any Local Authority. It, therefore, appears that education services provided by Government will not be taxable. There are no specific provisions for inclusions or exclusions
of coaching and training services or any other activity related to education elsewhere in the proposed law.
Impact in GST Regime
Based on the provisions of GST Law, it can be said that education sector shall be impacted both positively and negatively under the GST regime.
- The rate of tax is go up by 3% as GST levied @18%.
- There are likely to be concerns in valuation of coaching services in view of the industry practice of discounts / concessions / scholarship. The proposed valuation rules are different from the existing one and as such coaching institutes need to frame an appropriate policy for such discounts in advance making it a part of documentation.
- Service providers having centralized registration will have to get registered in each state whether providing coaching on own account or through agent (franchise).
- The procedure for all the invoices / receipts towards inward and outward supplies will become cumbersome as each one of them will have to be uploaded in the system.
- The frequency and number of returns to be filed will go up.
- There is a provision for GST audit if the turnover is more than prescribed limit.
- The procedure for taking credit of input taxes will become simple and seamless which will have a positive impact.