As per Constitution of India, Education is a right to every citizen of India. Moreover, education can’t be sold and one can not earn profits by selling Education in India. So, education is a services and not a business. It is generally provided through charitable trusts or societies. Under GST also, education is kept as exempt service. All the services provided by educational institutes to its students, faculty/staff are exempt from GST. It means, tution fee charged from students is free from any GST. In this article, we will go through in detail “GST Impact on Educational Institutions” with all the relevant provisions of GST.
Meaning of Educational Institution
Educational institution” means an institution providing services by way of,-
- pre-school education and education up to higher secondary school or equivalent (i.e. schools upto 12th standard);
- education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force (e.g. education degree from Colleges) ;
- education as a part of an approved vocational education course;
GST on Services Provided by Educational Institutions:-
As per entry no. 66 of CGST-R-12/2017, Services provided by an Educational Institution to its Students, Faculty and Staff are exempt from GST. There is no GST on Educational Institutions where such institutions are providing services in the normal course like provision of hostel facility, provision of meals, transportation, security, housekeeping, laundry, medical check-ups, etc. Any service provided by its own by an educational institution is kept under exemption schedule.
However, if these services are outsourced to any third party, then, exemptions will not be eligible. Government is very clear to save education from becoming a business. Today, more or less, educational institutions are shifting from social cause to business. To stop this practice and to remove interference of third parties in fair education system, government has taken the steps to tax the services provided by third parties to these institutions. However, some exemptions being provided to Schools “serving upto 12th standard” for some services. (discussed later)
W.e.f. 25.01.2018, following service is entered in exemption schedule:-
“Services provided by Educational Institution by way of conduct of entrance examination against consideration in the form of entrance fee”
Generally, Educational institutes take an entrance exam before admission to such institute and charge some amount in the form of ‘Prospectus Fee’ or ‘Entrance Exam Fee’, etc. As this service is provided to those who are not the students of such institute as on the date of such examination, the fee was taxable under GST before 25.01.2018.
On the request of industry, GST Council has allowed to provide such service as exempt service w.e.f. 25.01.2018 vide CGST-R-2/2018.
However, it may be noted here that conducting of exam for any other agency, institution (other than educational institution), company, organisation, department, etc. are not exempted under this entry.
GST on Services Received by Educational Institution from any other person
Any services taken by an Educational Institution from any other person are liable to GST. However some services are kept under exemption schedule even if outsourced from third parties.
Following services received by the educational institutions providing education services only by way of pre-school education and education up to higher secondary school or equivalent are exempt even if these services taken from any other person:-
- transportation of students, faculty and staff;
- catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory;
- security or cleaning or house-keeping services performed in such educational institution;
- services relating to admission to, or conduct of examination by, such institution;
It is pertinent to note here that all these services are exempt only when these services are received by educational institution itself.
If a service is received by student, faculty, staff directly from third party, (where educational institution have no direct nexus), such service would not be eligible for exemption. For example, if a school has selected a caterer to provide food services to its students, where student have to pay directly to such caterer for his meal, this service would be liable to GST at the rate of 5%.
Services received by any educational institution “other than those providing education services only by way of pre-school education and education up to higher secondary school or equivalent” are exempt even if these services taken from any other person:-
- services relating to admission to, or conduct of examination by, such institution; and
- supply of online educational journals or periodicals.
Moreover, import of services by such educational institution by way of supply of online educational journals or periodicals from a person providing such services located in non-taxable territory is also exempt.
Extension of some exemptions to third parties providing services to educational institutes
W.e.f. 25.01.2018, entry no. 22 of exemption notification provides for exemption to Services by way of giving on hire of motor vehicle for transport of students, faculty and staff, to a person providing services of transportation of students, faculty and staff to an educational institution providing services by way of pre-school education and education upto higher secondary school or equivalent;
Services provided by IIMs:
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 programmes, except Executive Development Programme are also exempt from GST: –
- 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;
- fellow programme in Management;
- five year integrated programme in Management.
