GST on educational services

Educational services are considered primary services in any country, and governments of all countries treat it as a service that is of social cause.

Therefore, the majority of services related to education are exempted, however, due to the increased commercialization of education there is a need to tax some of the services related to education.

The government of India is very generous in providing exemptions to basic educational services, in this article, we will discuss and guide on GST applicability for services of academic institutions.

Which are considered educational institutions under the GST Act?

Institutions providing services by way of

• Pre-school, which, even though optional, is exempted from GST.
• School education up to higher education or equivalent.
• Education as a part of curriculum for obtaining qualification recognised by any law for time being in force, in simple educational services of providing degree course, postgraduate course and other courses recognised by UGC ( The university Grants Commission Act 1956 ), AICTE (All India council for Technical Education Act 1987), IIT, IIM.
• Education as a part of approved vocational education course approved by National Council for Vocational Education and Training (NCVET)

GST exemption for educational services can be classified under two categories, services provided by the educational institutions and services provided by the third party to the education institution.

Services provided by an educational institution

All the services provided by the above 4 educational institutions are exempted as far as the services are directly relatable to providing the educational services and not artificially bundled.

The educational services should be provided to its students staff and faculty, if the services are provided to third party then is shall not be treated as exempted services.

Fees collected for conducting entrance exam is also exempted from GST.

Services of private coaching centre for school education or higher education is not exempted.

Services of day care or kinder garden is taxable under GST, exemption is available only from pre school or pre KG and up to higher secondary school for school education.

Illustrative list of services provided by educational institution exempted from GST.

• Tuition fees in any form in form of term fees, special fees, lab fees, etc.
• Exam fees
• Fees collected for any extracurricular activities
• Transport fees
• Fees charged by boarding school for accommodation and food

GST on services provided by third party to Educational institution

Exemption on services provided to pre school and up to higher secondary school.

• Transport of students, staffs, and faculty is exempted from GST, therefore where the passenger transport services is provided by the third party to school to transport its students, faculty and staffs, it is exempted and there is no upper limit on the tariff or charges.
• Catering or any mid day meal sponsored by the government, so in case where a catering establishment runs a canteen in a school premises then the turnover from the canteen located at the school premises is wholly exempted from GST.
• Security or housekeeping services provided to above 2 educational are also exempted from GST.

Exemption on services provided to vocational training institute approved by NCVET.

• Only services provided for admission or conducting exams are exempted to third party for vocational training institute.

Exemption on services provided to institutions providing degree courses and others approved by UGC and AICTE, IIT, IIM.

• Services provided for conducting exams and admission into course is exempted from GST.
• Supply of online educational journals and periodicals.

Does GST registration for educational institutions is required ?

GST registration is not required to be applied by educational institution where it provided only exempted educational services.

But in case where educational institution also provides taxable services, GST registration for educational institution is required to be applied as per section 22- registration on crossing threshold exemption limit and section 24- Compulsory registration irrespective of turnover.

Educational institution can opt for composition scheme of taxation if eligible for supply of other taxable services. Composition scheme will be beneficial for educational institutions due to fact that profitability will be high if opted for composition scheme.

GST Act does not differentiate between type of establishment as proprietorship or partnership firm or private limited company registration or charitable trust, therefore even when the educational institution is registered as public charitable trust and provides taxable services relating to education, provisions relating to GST registration is applicable.

Other important points for educational institution GST compliance.

• Only educational services approved by the concerned board or law are considered as educational services, therefore where a private coaching institute is running a tutorial for private students then it is considered as taxable services.
• Services provided by international schools are exempt as far as it is equivalent to high school education stream like international board.
• In case where the educational institution provided unrecognised course with recognised course, it will be exempted only if it’s naturally bundle e.g., yoga, special sports, extracurricular activities, linguistic courses, gymnastics classes.
• Placement services provided to educational institutions are taxable.
• Fees collected from companies by educational institutions such as ITI, colleges, universities for conducting campus interviews is taxable.
• Courses offered by coaching or training institutes for clearing competitive exams are taxable under GST.
• Catering services provided by third party in any premises other than school education is taxable under GST.
• Input tax credit is available against exempted educational services, therefore where a transporter provides transport services to school, and he cannot claim input tax credit against the inputs used for it.
• In case of taxable food and beverages services are provided to an educational institution, then the applicable GST rate is 5 %.