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Direct and Indirect Tax in India

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In India, there are 2 types of tax: Direct Tax and Indirect Tax. There is a difference in tax issue between State and the Central Government. Through this loophole sometimes taxpayers escape the system. So, GST has been launched to reduce the inefficiencies of the tax system.

What is GST?

India has finally implemented GOOD AND SERVICE TAX on July 1, 2017. Now taxation of goods and services are clear between the state and central government. This system will not leave any party in a bitter state. The customers will now be able to get rid of double taxation. This move has now transformed into” a common market place”. This decision has affected many sectors starting from building raw materials to the education sector.

Relation between GST and Education

Education is a subject of prime importance for a developing country like India. The Government has always been determined to extend all sorts of tax benefit to the education sector. Our education sector is one of the largest in the world and our distance education sector is also increasing. The motive is to provide good and stable policy for the students.

In India, the education sector is broadly divided into 2 groups: Public and Private sector. The most important decision taken is to keep education sector in zero or minimal tax bracket. The institution that provides higher education will not be GST free. The private institutions have to incur a tax of 5% according to the new GST law.

GST Governments stand on

It is being glorified by the current government as a system that will uplift the economy of our country. Though the concept idea was materialized in2000. It was a challenge for the government to implement it successfully after the drawbacks of demonetization. The government is confident enough about the reforms made in the education sector.

Scope and future of GST

India has a multidimensional economy. Any economic reform here needs some time to settle. But, the scope of GST in the education sector looks bright for both the teachers and students.

Services that are exempted under GST are:

  • Education from preschool to higher secondary
  • Service provided by educational institution to its teachers and staffs
  • Catering provided by mid day meal provided the central government.
  • Study materials for course study
  • Examination fees
  • Late fee payment, replacement of id cards
  • Fee for the excursion related to courses study
  • Any service provided by the national skill development corporation for the students.
  • Vocational trainings

Services that are not exempted:

  • food and accommodation for excursions
  • non academic requirements for study
  • Supply provided by third parties such as a computer or any sports article.

The vocational training has also been exempted from GST which is a welcome sign for India’s future. But the coaching institute has to pay a tax around 12% to 15% as they don’t provide any direct certification. The GST era will strive to bring the total cost of learning without sacrificing the quality of education. It is the moral responsibility to look after this sector for the development of the younger generation.

The finance ministry made sure to increase the technical knowledge of the student through National Skill Development Corporation. It made sure that the parents don’t need to bother about the taxes incurred by the school.

Impact on education sector

According to the GST law, the education sector might experience both positive and negative impact on it. The school might not include any GST on the taxable supplies but in order to make a little adjustment, the cost might increase in the event of taxable supplies later on. The tax rate might increase by 3-5%. If the government considers coaching to be essential it might reduce by few percentages.

Education is a prime necessity as it has been mentioned already and now students are left with no option but to pay an extra 3-5% to get quality education afterward. So the most negative impact will be felt by students opting for coaching classes in quest of better tutors. Education is one of the major sector for any economy. The education of country’s youth decides how the economy of that country will flourish. Education promotes understanding, vision, creativity and productivity of people which helps in the advancement of a country. In India, Education is provided with both by the public as well as private sector.

Indian government’s foremost priority is to provide low-cost education to one and all. That’s why education sector enjoys lots of tax exemption as they are not taxed or comes in the negative list. After implementation of GST, the similar situation continued with the tax exemptions for the sector being retained and the most important thing is that educational services and services related to the education/higher education provided to the students are covered under the GST exempt list.

According to the GST proposed law, services provided by educational institutions have been kept outside from the Goods and Services Tax (GST). Here educational institutions mean any of the institutions providing services by way of:-Pre-school education and education up to higher secondary school or equivalent or Education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force; or Education as a part of an approved vocational education course.

Following Education Related Services are Exempt Under GST:

Curriculum related or course materials, Assessment and examination fees, Student administrative services such as registration, printing of academic transcripts, issuing or replacement of student cards, late fee payments, administration of the library etc Excursion and field trips related to the course of study or part of curriculum requirement, except for food and accommodation supplied on those trips.

Services provided by educational institutions to students, faculty, and staff Transportation of students, faculty, and staff; Catering, including any mid-day meals scheme sponsored by the Government; Security or cleaning or house-keeping services performed in such educational institution; Services relating to admission to, or conduct of examination by, such institution; up to higher secondary.

Exemption has also been granted to the services provided by the IIM–2 year full-time residential PG programs in Management for Post Graduate Diploma in Management, admission in which is granted via CAT Fellowship programs in Management 5 Year Integrated Programs in management studies (but excludes the Executive Development Program).

The Education Provided By Below Are Also Exempted Under GST: National skill development corporation set up by Indian government National skill development corporation approved sector skill councils National skill development corporation approved assessment agencies The national skill development programs approved by NSDC A vocational skill development program approved under national skill certification and monetary reward scheme Any scheme implemented by NSDC with training partners.

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