“Education is the most powerful weapon which you can use to change the world” – Nelson Mandela.”
Education plays a vital role in the economy of the country. High rates of education in a country are better in all aspects, i.e., better health, better civic involvement, better communication, better thinking skills, better discipline, etc.
This noble task of giving education is carried out by educational institutions.
What is an Educational Institution?
Educational institutions are noble service providers who perform the task of providing literacy to children as well as adults for a bright future. In India, education is provided by the public as well as the private sector.
The main motto of the Indian Government is to provide education to all at low costs. Taxing on the education sector is visualized as a social privilege rather than a business deal and hence this sector enjoys varied tax exemptions.
Since the government promotes free education in villages and other rural areas, these services are devoid of tax payments. However, the commercialization of education is also prevalent, and hence when GST was introduced, it tried to maintain a fine balancing line by ensuring that all the core educational services are fully exempt from GST, whereas other services are taxed at a standard rate of 18%.
What is an Educational Institute under GST?
As per the GST norms, the “educational institution” is defined as an institution that provides services by way of:
-
- Pre-school education and education up to higher secondary school or equivalent
- Education is a part of a curriculum for obtaining a qualification recognized by any law for the time being in force.
- Education as a part of an approved vocational education course.
Exemptions Available:
The following services provided by an educational services is exempt from GST
-
- Services provided by an educational institution to its students, faculty and staff
- Services provided by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee
The following services provided to an educational services is exempt from GST by way of –
| Sr.No | Types of Educational Institutions | Exemptions Available for the services provided to educational institutions | |
|---|---|---|---|
| 1 | An educational institution providing preschool education and education up to higher secondary school or equivalent. |
|
|
| 2 | An educational institution providing education as a part of a curriculum for gaining a recognized qualification |
|
|
| 3 | An educational institution providing education as a part of an approved vocational education course |
|
Exemptions available to Institutions also include:
- The government/local authority/government authority who is carrying on the activity of education is exempted from GST as this is not included in the ambit of the supply of services.
Example: Municipal schools / Government schools.
-
-
Services provided below is also Exempted Under GST:
-
-
- National skill development corporation set up by the Indian government
- National skill development corporation approved Sector skill councils
- National skill development corporation approved Assessment agencies
- National skill development programs approved by the NSDC Vocational skill development program approved under national skill certification and monetary reward scheme
- Any scheme implemented by NSDC with training partners
GST Applicability:
Let’s check out the GST applicability for:
-
Higher Educational Institutions:
-
-
Services provided by Higher Educational Institution as a part of curriculum for obtaining a qualification recognised by any law are exempt from GST.
-
Services which are provided to higher educational institutions are taxable. The supply of services such as transportation, catering, housekeeping, and security services to higher education institutions will have to face GST charges. They will be borne by the higher educational institution.
-
-
Private Coaching Centres :
Though private coaching centers, unrecognized institutions, private tutorials, etc. are educational institutions, they don’t fall under the approved vocational education course and hence will not be considered educational institutions under GST.
They are refrained from GST exemptions and the services provided by them are taxable at a GST rate of 18%.
-
Distant Education:
Distant education mainly opted for higher studies is taxable at a rate of 18%.
-
Boarding/Lodging in Hostels:
Educational institutions which offer preschool education or any other equivalent education leading to qualification by law, and that offer output services like boarding/lodging facilities in hostels are fully exempt from GST.
In short, annual fees/subscriptions which are charged as lodging/boarding charges to the students by these institutions don’t come under the GST regime since they are exempt from the same.
In case these services are bundled by boarding schools, i.e. value of education, lodging, and boarding are attached, then their taxability will be determined as per the defined norms. If the fee structure is well defined for all these three factors then these services will be evaluated separately.
-
Training Programmes, Camps, or Yoga Programmes:
These above-stated events are considered commercial events and hence fall under the GST regime.
-
Books/Stationary given to Students:
Books distributed to students is exempt under GST but, school uniform, stationery items, and other non-academic related supplies are taxable under GST.
Supplies provided by third parties like computers, sports equipment, musical instruments, and other after-school activities offered directly by third parties are liable for GST, thus being taxable.
Other factors like:
-
- Advertisement services provided to educational institutions for brand promotions are taxable.
- Other services like music, swimming, karate, etc. provided to students directly by the educational institution are exempt from tax, but if these services are provided by third-party vendors, the same is taxable.
- Admission services for enrolling students are exempt from GST.
- Campus placement services which are provided by educational institutions are taxable.
Eligibility of Input Tax Credit (ITC) to an Educational Institution:
-
- Education institution is not eligible to avail ITC on inputs/input services which are exclusively used for effecting exempt supplies.
- However, such institutions are eligible to avail of the input tax credit on input/input services that are used for effecting taxable supplies.
- On inputs/inputs services that are used for effecting both taxable and exempt supplies, ITC eligible to be availed will be calculated as per Rule 42/43.
Example:
Suppose:
C = Common credit, i.e., input tax credit on input/input services which is used for effecting both taxable and exempt supplies>/P>
E = Aggregate value of exempt supplies during the tax period (Period for which return is filed)
F = Aggregate value of Taxable supplies during the tax period
-
-
Amount of Ineligible Credit = C*E/F
-
Amount of Eligible Credit = C – Amount of Ineligible Credit
-
Wrapping Up:
GST has made its way into Class X, ICSE syllabus from 2020, thus expanding the knowledge of the students and briefing them about the newly introduced tax reforms.
To know more about GST compliances and to avail expert guidance for the same, kindly approach Choksi Tax Services (CTS).