How GST is Burdening India's Higher Education: Unintended Consequences

The implementation of the Goods and Services Tax (GST) in 2017 was hailed as a landmark reform aimed at simplifying India's complex tax structure. By consolidating various indirect taxes into a single, streamlined system, GST was expected to enhance ease of doing business across sectors. However, as the tax regime has evolved, its impact on higher education, particularly research funding and essential allied services, has become a matter of serious concern.

Recent Developments: A Wake-Up Call for Educational Institutions

The recent issuance of GST show-cause notices to premier institutions like IIT Delhi and Anna University has sent shockwaves through the academic community. These notices, demanding payments for GST on research funding received between 2017 and 2022, highlight a disturbing trend where educational institutions are being increasingly burdened by GST liabilities. For instance, IIT Delhi has reportedly been asked to pay ?120 crore, while Anna University faces a demand of ?36 crore. These hefty demands not only strain the financial resources of these institutions but also threaten to stifle the very research activities that have placed them at the forefront of global academia.

The GST Burden on Higher Education Allied Services

While the immediate focus has been on research funding, the broader issue of GST on essential allied services provided by higher education institutions cannot be ignored. Services such as hostel accommodations, canteens, transportation, and security are integral to the functioning of universities. However, these services are subject to GST, significantly increasing the operational costs for institutions. Consequently, universities are often forced to pass these costs onto students, making higher education less affordable and accessible.

The recent exemption granted for accommodation services up to ?20,000 per month for stays exceeding 90 days is a welcome relief but addresses only a small part of the problem. However, this measure does not alleviate the financial burden posed by GST on other critical services within higher education.

The Case for Comprehensive GST Exemptions

Given the growing financial pressures on higher education institutions, there is an urgent need for a comprehensive review of GST’s applicability to this sector. Educational institutions are not commercial entities; their primary purpose is to impart knowledge, foster innovation, and contribute to the nation's development. Taxing essential services and research activities contradicts this purpose and places unnecessary financial strain on institutions that are already operating within tight budget constraints.

A comprehensive GST exemption for all allied services provided by higher education institutions—including hostel accommodations, canteen services, security, transportation, and funded research projects—would go a long way in ensuring that education remains affordable and accessible. Such an exemption would also align with the government’s broader goals of promoting education and fostering a robust research ecosystem in India.

A Call to Action

India’s aspirations to become a global leader in education and research are deeply rooted in Prime Minister Shri Narendra Modi ji’s vision of transforming the nation into a knowledge superpower, as articulated in the National Education Policy (NEP) 2020. The NEP emphasizes the need for fostering innovation, research, and holistic development within our academic institutions. To realize this vision, it is essential that we provide our educational institutions, especially self-financed ones, with the necessary financial and policy support.

As a concerned educationist, and the Chairman of the ASSOCHAM National Council on Education, I urge the government to take immediate and decisive action to address the pressing challenges posed by the current GST policies on higher education. The Union Education Ministry has already recognized the gravity of the situation, and there are indications that the matter may be escalated to the Finance Ministry and the GST Council for reconsideration. This is a positive development, but it must be followed by concrete policy changes that reflect the critical role of education and research in national development.

Granting a comprehensive GST exemption to higher education institutions is not merely a matter of financial relief; it is an investment in the future of India. By alleviating the tax burden on research funding and essential services, we can ensure that our institutions continue to innovate, thrive, and contribute to the nation’s progress on the global stage.

The decisions we make today will shape the future of India’s education system and its standing on the global stage. We must act now to safeguard our educational institutions and ensure that they continue to serve as pillars of knowledge, innovation, and progress.