Services provided by an educational institution to its students, faculty and staff are exempted from GST.
Further all universities providing qualification recognized by the Government are also exempt. All Government educational institutions including vocational education courses are also exempt. Educational institutions set up under specific Act are also exempt like Indian Institute of Management. In other words, all educational institutions except which are of commercial nature and carrying on coaching activities are exempt.
“Education services 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 recognised by any law for the time being in force; or
- education as a part of an approved vocational education course.”
While services provided by an educational institution are out of the GST ambit, unfortunately the same is not the case with services provided to an educational institution. Services provided to higher educational institutions are taxable.
In fact, sprawling campus of higher educational institutions, especially if these have boarders are likely to incur heavy expenditure on some of the above items - such as security, housekeeping or catering, maintenance of laptops provided to students, or maintenance of a swimming pool or basketball court.
Thus, non – academic services which are mostly outsourced by the universities and colleges such as catering, security, house-keeping, medical and transportation to various vendors would invite 18% tax under GST. Charges for mess, canteen, laundry and medical are directly paid by the stakeholders to the vendors. For security and housekeeping etc, institutes will have to bear the 18% tax. The GST Council has exempted the outsourced services in education sector from the levies only up to higher secondary level.
The GST exemption on procurements is available only to schools (from pre-school up to higher secondary school or its equivalent).
The 'input' or supply of services such as transportation, catering, housekeeping, services relating to admission or conduct of examination to higher educational institutions will bear a GST levy. This will have to be borne by the higher educational institution. As the 'output' (service of providing education to students) is tax free, no input credit would be available.
There is an additional issue. The impact of non-eligibility of input tax credit, is even more pinching due to the mandatory reverse charge mechanism if the goods or services are procured from unregistered dealers. Educational institutions typically obtain services from freelancers such as supervisors, research assistants, paper setters et all. Payments to such individuals would attract GST under reverse charge - it is the educational institution which would pay this tax and also comply with formalities of uploading documents on the GSTN portal.
Increased taxes will take a toll on students. Not only will the tuition fee be indirectly affected, the overall cost of education will increase as students will have to pay more for stationary, books and other necessities, whose prices will increase due to increment of taxes on raw material.