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March 3, 2025

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Taxation GST on Educational Institutions

Education is always the key to success, and talking about educational institutions provides some services that include educating our kids and also adults. As we know, "education has no age". It is very important to understand the impact of GST on services like education, education, institutions like schools, colleges, coaching, and more. Someone may wonder why we talk about this, so we want to tell them that it is directly connected to your fees, aka your pocket, which might pinch your pocket. So, in this article, we will talk about GST on educational services.

Are Educational Institutions Tax-exempt?

Notification no. 12/2017-Central Tax (Rate) dated 28th June 2017 describes the term' Educational Institution'. Therefore, it simply means an institution engaged in as long as services by way of:

1. Pre-school Education

2. Education up to higher secondary school/ equivalent

3. Education by means of part of the curriculum in order to obtain a prerequisite familiar by any law for the time being in force;

4. Education as part of a permitted vocational education course.

Pre-GST Laws Laid Down for Educational Institutions?

Sketchily speaking, the scenario pre-GST and post-GST relating to tax inferences on Educational Institutions is, by and large, the same. Pre-GST, the tax inferences on Educational Institutions are told hereunder:

1. Services provided by an Educational Institution to its faculty, staff, and students are exempted from tax.

2. Following services provided to an Educational Institution is exempt from tax.

3. Transportation of faculty, staff, and students;

5. Catering (including any mid-day meals system sponsored by the Government)

5. Security housekeeping or spring-cleaning services which are performed in the Educational Institution;

6. Services involving admission to or conduct of examination by such Educational Institutions.

What Exemptions are Available to Educational Institutions Under GST?

Basic exemption made available to Educational Institutions under GST is covered by entry no. 66 of notification no. 12/2017- Central Tax (Rate) dated 28th June 2017. Notably, the entry offers an exemption to both, i.e. –

1. Services provided by the Educational Institutions (wherein the educational Institution is the service provider); and

2. Services are provided to educational institutions (wherein the educational Institution is the service receiver).

3. The said exemption is on condition that video entry no. 66 of notification no. 12/2017- Central Tax (Rate) dated 28th June 2017 is published.

GST on Educational Services (Rates)

GST on educational services in India range from 5% to 28%. The rates vary knowingly depending on the type of service provided.

GST Rate on School Education

GST on school education is normally exempt for most institutions, including government-run schools, schools that local authorities, and non-profit organizations can fund, as schooling is considered a public service.

However, private schools worked by for-profit organizations may be subject to an 18% GST on tuition fees and other enlightening services. These schools can also claim Input Tax Credit (ITC) to offset the GST paid on their inputs.

GST Rate on Higher Education

Higher education services in India are normally taxed at 18% GST, which applies to colleges and universities, besides professional courses.

Exemptions

Non-Profit Institutions: GST for educational institutions run by the Government, local bodies, or trusts are usually exempt.

1. Recognized Courses: Programs leading to degrees or diplomas recognized by government bodies like UGC or AICTE may be exempt.

2. Vocational Courses: Convinced government-approved vocational courses are too exempt.

3. The exemption hinges on specific criteria. Private institutions, coaching centers, and professional courses are normally subject to an 18% GST rate.

GST Rate on Educational Training and Coaching

Vocational training, education classes, and private tutorials, including coaching for tests like JEE, NEET, UPSC, and other professional courses, are normally subject to an 18% GST rate. Below are the exemptions:

1. Government-Approved Vocational Courses: Skill development programs permitted by the National Skill Development Corporation (NSDC) may be accepted from GST.

2. Special Categories: Certain vocational progressions aligned with national priorities or social welfare purposes may also qualify for exemptions.

GST Rate on Distance Education

Distance education services are usually taxed at 18% GST. Given below are the GST exemptions on distance education -

1. Government-Recognized Institutions: Distance education plans offered by UGC- or AICTE-recognized universities besides colleges may be exempt. For example, IGNOU's coldness MBA programs typically fall under this exemption.

2. Vocational Courses: Certain government-approved professional programs may also be exempt after GST.

GST Rate on Online Courses and Training

Online courses and training plans are generally subject to an 18% GST rate, given their mounting popularity. Given below are some of its exemptions -

1. Government-Run Platforms: Online courses accessible by government-run platforms may be exempt, similar to outdated education services.

2. Private Online Education Providers: Most private platforms besides coaching institutes are subject to 18% GST.

GST Rate on Education Materials

GST for educational institutions frequently provide materials along with their services, and GST rates vary based on the type of material:

1. Essential textbooks besides stationery (notebooks, pens, pencils, erasers) – 5% to 12% GST

2. Non-essential items (school uniforms, bags, certain stationery) – 18% GST

3. Printed materials (question papers, reply sheets, study materials) – 12% to 18% GST

4. The exact GST rate is contingent on the item's classification, in addition to the HSN code.

GST Rate on Ancillary Services Provided to Educational Institutions

While core educational services are normally exempt or taxed at concessional rates, ancillary services provided by schools, colleges, and universities are subject to GST at different rates:

1. Transportation Services (for students besides staff) – 5% GST (with Input Tax Credit available)

2. Catering Services (plus mid-day meals) – 18% GST

3. Rental Services (income from rental classrooms, hostels, or administrative buildings) – 18% GST

Suggested Read: GST Exemption on Educational Course Fees

Conclusion

The importance of Education in India can't be destabilized due to the majority of the population being under 25 years of age. Due to the large population and deficiency, education should easily be available at a lower cost. The operation of GST has led to a rise in the cost of higher Education and Distance Education. When schools were measured and exempted from GST, the Government had to give the same reflection to HEIs as well, which would have avoided such a situation.

FAQs

1. Are educational institutions taxable?

Some charitable actions get concessions and exemptions under the Income Tax Act 1961. Education is a benevolent activity as per Section 2, clause 15. Accordingly, educational activities are exempted from taxation under sections 11, 12, and 13 of the Act.

2. Is RCM applicable to educational institutions?

Educational institutes may be liable to pay GST under RCM for certain services where the supplier is not itemized under GST. Institutions must comply with the RCM provisions if they are valid.

3. How much is the GST on education fees?

GST is applicable to certain education amenities in India. While pre-school and primary to secondary education services are exempt since GST, higher education, private tuition, and vocational training amenities attract an 18% GST rate.

4. Which section is education tax exemption?

Section 80C of the Income Tax Act in India provides tax assumption benefits for tuition fees paid by parents for their children's education. The maximum bound for income tax deduction under Section 80C is Rs. 1.5 lakh.

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