Impact of GST on Education Sector
Taxation of education services under the GST has always remained a complex issue as education is considered more of a social cause rather than a business one. However, the commercialization of education is a reality therefore, understanding the implications of GST for the education sector is important as it affects the pockets of common taxpayers. To maintain a fine balance, the GST authorities have distinguished between core education services and other services to tax the same. The core educational services provided or received by educational institutions are exempted whereas the GST at the rate of 18% is imposed on other services. This article provides a complete guide on the impact of GST on the education section and how it affects the common man.
Core Educational Services
Education is not defined in the CGST Act but as per the Apex Court’s Decision in “Loka Shikshana Trust v/s CIT” education is defined as a process of training and developing knowledge, skill, and character of students by normal schooling. The core educational services are taxed at the rate of 18%. The services are as follows
- Pre-primary education services
- Primary education services
- Secondary education services
- Secondary education services general, technical and vocational
- Higher education services
- Higher education services general, technical and vocational
- Other higher education services
- Specialized education services
- Other education & training services and education support services
- Cultural education services
- Sports and recreation education services
- Commercial training and coaching services
- Other education and training services
- Services involving the conduct of examinations for admission to educational institutions
- Other education support services
GST Exemptions for Educational Institutions
All the services provided by educational institutions to students, faculty, and staff are exempt under the GST. Here under the CGST Act, educational institution means
- 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
- Education as a part of an approved vocational education course
Taxable Educational Services under GST
Private coaching centers or other unrecognized institutions though self-styled as educational institutions are not treated as educational institutions under the GST therefore, no exemption is applicable.
Job placement services for students in educational institutions are liable to GST. For example, IITs or IIMs charge a fee from corporate employers like MNCs who come for recruitment through campus interviews, such service is taxable under GST.
Boarding schools that provide education along with other services like dwelling units, and food come under the scanner of GST. Services provided by boarding schools are considered bundled services and their taxability is determined as per the principles laid down in section 2(30) read with section 8 of the CGST Act 2017.
Schools, colleges, or any other educational institutions run by charitable trusts offering educational programs to abandoned, orphans, homeless children, physically or mentally abused persons, prisoners, or persons over the age of 65 residing in rural areas, and are wholly exempted under GST.
Education is a fundamental right backed by the constitution of the country. Therefore, the education sector is partially taxed and partially exempted under the GST. Other services than educational are taxed at 18%.
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