Taxation of Educational Institutions under GST

Educational institutions provide the noble service of educating children for a better future. It's vital to understand the impact of GST on the services offered by educational or academic institutions—whether a school, college, or professional training institute—because it will directly affect your pockets. The article includes detailed information on this aspect. Stay with us.

What's in the article for you-

• What were pre-GST laws laid down for Educational Institutions
• What is an Educational Institution under GST?
• Are Educational Services considered as Supply and its Taxability
• GST Exemptions Available to Educational Institutions 
• Classification and GST Rates on Education Services 
• Should educational institutions be registered under GST?
• Applicability of GST on Higher Educational Institutions
• Applicability of GST on Training programs, camps, yoga programs and other events
• Whether books or stationery distributed to students covered under GST?
• Chargeability of GST on Private Coaching centres and Distance Education
• GST Impact on the Education Sector
• FAQs

Latest updates

9th September 2024

In the 54th GST Council meeting, the Council clarified the following 

1. . However, services provided by state/central boards to government schools will be exempted prospectively. Past liabilities (from 1st July 2017 to 17th June 2021) will be regularised. 
2. Also, university affiliation services to their constituent colleges are not covered within the ambit of exemptions provided to educational institutions in notification No. 12/2017-CT(R) dated 28.06.2017 and hence are taxable at 18%.

What were pre-GST laws laid down for educational institutions

Services provided by an educational institution to its students or faculty or staff were exempt. (Mega Service Tax Exemption -Notification Number ST-25/2012 dated 20th June 2012) 

Later, the exemption in relation to services provided to educational institutions was modified with effect from 1st April 2014 and scope of the exemption got restricted for some specified services provided to Educational Institutions (Institution providing pre-school education and education up to higher secondary school or equivalent) such as-

• Transportation of students, faculty and staff
• Catering, including any mid-day meals scheme sponsored by the Government;
• Security services performed in such educational institution
• Cleaning services performed in such educational institution
• House-keeping services performed in such educational institution
• Services relating to admission to, or conduct of examination by, such institution

Any other service provided apart from those mentioned above to educational institutions was taxable. Also, any service provided to an institution other than Institution providing pre-school education and education up to higher secondary school or equivalent was taxable.

What is an educational institution under GST?

Under GST, “educational institution” is defined as an institution providing services by way of:

• Pre-school education and education up to higher secondary school or equivalent;
• Education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;
• Education as a part of an approved vocational education course;

Are educational services considered as supply and its taxability

Taxable supply means a supply of goods or services or both which is leviable to tax under GST. The following services provided by an educational institution to its students, faculty and staff or to an educational institution are not required to be taxed under GST.

• 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 institutions
• Services relating to admission to, or conduct of examination by, such institutions up to higher secondary

While services provided by an educational institution are out of the GST ambit, the same is not the case with services provided to an educational institution. The GST exemption on procurements is available only to schools (from preschool up to higher secondary school or its equivalent). 

However, any service provided to an institution other than an educational institution (as defined above) is treated as a taxable service.

Services provided by the coaching centres, tuitions and private tutorials do not fall under the approved vocational education courses or approved by the government under law. Hence, they are taxable at 18% GST rate.

GST exemptions available to educational institutions 

• Income from education is wholly exempt from GST if a charitable trust is running a school, college or education institution for abandoned, orphans, homeless children, physically or mentally abused persons, prisoners or persons over the age of 65 years or above residing in a rural area.
• Government or local authority or governmental authority carrying on the activity of education is exempted from GST as this is not included in the ambit of supply of services. For Example – Government schools / Municipal schools.
• Education provided by below are also Exempted Under GST:
  • National skill development corporation set up by the 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 Vocational skill development program approved under national skill certification and monetary reward scheme
  • Any scheme implemented by NSDC with training partners
• 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).

Classification and GST Rates on education services 

Should educational institutions be registered under GST?

• Where the educational institution is providing only education as a service then such fees are chargeable at NIL rate and such educational institutions are not required to be registered.
• Where educational institutions are also providing other supplies or other services, i.e., providing books to students, providing shoes or uniforms etc to students then in such cases such institutions are liable to get themselves registered.

Applicability of GST on higher educational institutions

Services provided to higher educational institutions are taxable and hence, the ‘input’ or supply of services such as transportation, catering, housekeeping, services relating to admission or conduct of examination to higher educational institutions will bear GST levy. This will have to be borne by the higher educational institution.

Applicability of GST on training programs, camps, yoga programs and other events

Training programs, camps, yoga programs and other events would be considered a commercial activity, liable for GST.

Whether books or stationery distributed to students covered under GST?

Supply of books is exempt under GST. However, uniform, stationery, and other non-academic related supplies are taxable under GST. Supplies provided by third parties like the musical instrument, computers, sports equipment and after-school activities offered directly by third parties are also taxable. 

To know about the taxability of food and accommodation service by educational institutions and coaching centres, read our article on GST on food and accommodation service.

Chargeability of GST on private coaching centres and distance education

• Private institutions and coaching centres do not have any specific curriculum and do not conduct any examination or award any qualification. Hence taxable at the GST rate of 18%.
• Distance Education is taken up generally for higher education and hence taxable at the GST rate of 18%.

For example, M/s Shambhavi Tutorials provides class 11th and 12th tuitions for subjects such as Maths, Physics, Biology and Chemistry, including JEE exams. A student enrolls in their Class 12th programme plus JEE coaching for which the billing is as follows:

Tuition fee: Rs.48,450

Books: Rs.20,560

Maintenance fee: Rs.5,000

Total Value of Invoice (before tax): Rs.74,010 

Taxable value = Rs.53,450 (Rs.48,450 + Rs.5,000)

CGST: Rs.4,811

SGST: Rs.4,811

Total GST charged: Rs.9,622

Total payable: Rs.83,632 (Rs.74,010 + Rs.9,622)

The private tutors and coaching centres must file GST returns like any other taxpayer in GSTR-1 and GSTR-3B either monthly or quarterly, depending upon turnover and whether or not they opt into the QRMP scheme. If they have opted into the composition scheme for service providers, then they must pay tax in CMP-08 and file GSTR-4 once in a year.

GST impact on the education sector

The importance of education in India can’t be undermined due to the majority of the population below 25 years of age. Due to the large population and poverty, Education should easily be available at less cost. Implementation of GST has led to rise in the cost of higher education and Distance Education. When schools were considered and exempted from GST, the government had to give the same consideration to HEIs as well, which would have avoided such a situation.