Currently, a host of services in the education and training sector are exempt from service tax. These services which are related to the delivery of education with an aim of obtaining a qualification are in the negative list under section 66D (1). The colleges and universities that are running degree programs and providing certificates recognised by law are exempt. This includes engineering, medical, chartered accountancy, management and a host of other such qualifying programs. Even the vocational training is exempt. The institutions providing services like pre-school education and going up to higher secondary level also qualify for the tax exemption.
There are also a number of services that are associated with the school services. These include 1) transportation of children, teachers and staff, 2) security and housekeeping, 3) admission services, 4) examination services, 5) catering and government mid-day meal services etc. All these services also enjoy the exemption from the taxation. Special programs run by the government like the skill development program run by National Skill Development Council (NSDC) and Sector Skill Council (SSC) are also a part of the negative taxation list. The training partner or assessment agency approved by them also enjoys the benefit of tax exemption.
The vocational training and skill courses that are certified by the National Council for Vocational training and the project implementation agencies under the Deen Dayal Upadhyay Grameen Kaushalya Yojana under the Ministry of rural development are exempted from the service tax liability. The services of coaching and training related to the recreational arena like arts, culture and sports are also a part and parcel of the negative list. What gets taxed today is the coaching school service that prepares the students for a particular exam like the medical or engineering examination. This is because these services do not lead to the grant of a recognised qualification.
It is quite likely that the negative list related to the education services gets carried, as it is, in the GST regime. With this, the transition of the exempted institutions and colleges to the GST era is likely to be seamless. The input services to these institutions are taxed and currently amount to 6 to 7 per cent. With the GST coming in at 18 per cent, the cost that is built into the system is going to move up to around 9 per cent. If the status quo of taxation is maintained in the education service, then the cost of providing the education service is going to go up. The government would do well to explore the zero tax rate option for the education sector under GST.
The coaching institutes will also have to gear up to meet the GST challenge like any other industry. This will include a requirement to register in every state where such service is being provided and complying with return filing norms in the various forms and sticking to the schedules. At present, they are not able to avail the benefit of input tax credit on the goods and services used by them. This will change under GST providing them with some solace.