Dr. D. Mukhopadhyay
GST stands for Goods and Service Tax and essentially it is an indirect tax. It is ultimately borne by the final consumers. The term ‘Tax’ is derived from Latin ‘ Taxare’ which means to estimate. There are two kinds of taxes and they are Direct Tax and Indirect Tax. Direct tax includes Income Tax and Wealth Tax whereas Indirect Tax includes Central Excise, Customs, Sales Tax, Service Tax etc. Indian Constitution is the genesis of all the laws in India. The Constitution of India came into effect on 26th January, 1950 and it is the supreme and all laws and Government actions are subordinate to the Constitution. If it is found that any Act, Rule, Notification or Government Order is inconsistent or is not according to the provisions of the Constitution, it becomes illegal and void and it is called ultra vires to the Constitution. So long Indirect Tax levying, collection and assessment procedure were found to be very complicated and it was difficult for the Government to make justice to the legal procedure. It was a long pending issue and responsibility of the Government was to simplify it in the national interest.
Article 246(1) of the Constitution of India states that the Parliament has exclusive powers to make laws with respect to any matter contained in List I in the Seventh Schedule to the Constitution and it is called ‘Union List’. According the Articles 246(3), State Government has the exclusive power to make laws for the State with respect to any matter enumerated in List II of the Seventh Schedule of the Constitution. List II is known to be State List. Central Excise, Customs , Service Tax and Central Sales Tax are contained in List I whereas State Sales Tax(VAT), Entry Tax or Octroi are contained in List II and therefore amendment of the Constitution was necessitated in order to bring about a single law to administer Indirect Taxes in the country and all the essential legal formalities have duly been complied with and finally Goods and Service Tax(GST) Act 2017 came into effect on First Day of July, 2017 . All the States including Jammu & Kashmir have legislated the State GST Acts in the respective Legislative Assemblies. Now there shall be one Indirect Tax with uniform tax rates throughout the length and breadth of the country. Experts are of the views that this is the biggest tax reform since Independence.
This write up aims at to discuss the impact of newly legislated GST Act on education sector of the country. So far, it has been available that minimum rate of GST shall be 5% and maximum rate shall be 28% and all together, there shall be four types of rate of Indirect Tax and remaining two are 12% and 18%. GST shall have financial impact on every citizen of the country including students in particular and the education sector in general. Education is an indispensible process to empower the nation by and large . Education is a service so it attracts GST as it used to attract Service Tax as per old laws of the country. It is worth mentioning that Education was kept under ‘Negative List’ of the Service Tax Laws on the grounds to make it less expensive so that everybody can have easy access to it. But items like stapler, pencil, sharpener, school bag , fountain pen, nib, refill , excise book and ball pen are subject to GST where tax rates vary in between 12% to 18%. Simply speaking, it should have been kept out of circumference of GST or it should be levied at minimum rate of tax. Coaching fee is subject to 18% Tax. Non conventional courses were under the tax bracket of 15% in the age of erstwhile service tax but now it is subject to 18% tax under GST regime. However, no tax shall be levied on services provided by education institutions from pre-schools to higher secondary level.
Although services provided by higher educational institutions are not taxed but services to those institutions are subject to GST . Excise books, note books, crayons etc shall be taxed at 12% and pens, school bags etc shall be taxed at 18%. Again, services or supplies provided by third parties like academic instruments, computers, sports articles and equipments, food and accommodation provided for excursion etc are not beyond the purview of GST. However, two year full time residential post graduate programs in management offered by IIMs through Common Admission Test (CAT) and Fellow Program in Management of the same Institutes are kept out of the circumference of GST. GST is a single tax on the supply of goods and services right from manufacturer to consumer.
It is destination based tax which implies that tax on any product shall be levied and collected by the State where it is ultimately consumed instead of where it is manufactured or produced. Under GST regime, some products shall become more expensive and some product shall be cheaper. For instance, school bag under old system was subject to 12.5% tax whereas under GST, it is subject to 18%, again ball pen and exercise book under old system were taxed @ 18.68% and now they are subject to 12% tax bracket and hence become less expensive. The GST Council constituted within the frame work of GST Act 2017 is the decision making organ of the State with respect to imposition and deciding tax rates from time to time. Indirect Tax is a fiscal law and it is essentially dynamic in nature. Tax is the only major source of the Government Exchequer. Therefore, in due course, many amendments in GST shall come into force.
Nobody will deny that every citizen of the country should pay tax to the Government. But now education sector is likely to be subject to more tax. Education is the weapon to empower the nation by and large and thus it is the responsibility of the state to provide education to all at affordable expense. Only an educated nation can bring about economic freedom to subject of the State. It is worth mentioning that Australia does have the most comprehensive GST system in the world and all most all the goods and services are subject to GST except education. In Australia, supply of services to educational institutions are zero rated. These institutions can claim a refund against the taxes paid by them on the inputs to extent of 100%. South Africa also follow more or less rigorous GST system just like Australia.
Higher tax means higher cost of service which shall discourage the foreign students who wish to study in India. During recent past , it has been seen that foreign collaboration are coming into picture as means of providing quality and globally recognized education by Indian organizations like BML Munjal does have a tie up with Imperial College, London, S. P. Jain Institute of Management & Research has tie up with ESB Business School of Reutlingen University, Germany. It is relevant to state that low GST would ensure higher education delivery at low cost and this will ultimately enable the non-profit seeking organizations to build good infrastructure and students shall be able to get quality education at affordable expenses. India can emerge as one of the major players in the international field of higher education and she can attract students from different countries belonging to third world countries at least if not first or second world countries. India has a good degree of potential to become developed country provided means and resources are rationally distributed and allocated.
Education of a country decides how the economy of that country shall flourish. Education enhances productivity and it helps in economic advancement of a country. In India, education is delivered both by public as well as privately owned organizations. Non conventional courses shall be expensive under GST regime. India has achieved a lot after independence but still belong to category of developing nation. Once education is made free of tax, it will attract the promoter of educational institutions and at less cost, education shall be accessible to all. It is therefore, recommended that the higher education in the line of pre-school as well as up to higher secondary level should also be exempted from GST or it should administered at nominal rate of tax if it is not possible for the Government to exempt it fully. However, it is hoped that GST implementation shall overcome the teething troubles which normally come into the way of any new system is introduced. The Government should keep in view that private promoters of education in the country shall be motivated when they are allowed more tax exemption as an incentive. It may be rational to state that Government resources are limited and it has to prioritize its allocation on the basis of necessity. Education is a necessity and not a luxury and therefore Education Sector and allied services should be made fully exempt from the purview of GST in order to make education affordable by all and less expensive.
(The author is Professor of Management, School of Business, Faculty of Management, Shri Mata Vaishno Devi University, Katra, J&K)
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