Students hit by tax hike on higher education services

India’s new Goods and Services Tax or GST being rolled out throughout the country in a far-reaching tax reform will mean applying to foreign universities will become more expensive, but the main effect will be on students at local universities who will have to pay more for accommodation and other essential campus services.

Educational events organised by foreign entities in India – which includes university recruitment fairs or information events – will also be obliged to pay taxes under the GST. Tests and examinations for admission to overseas universities will also be subject to GST which, from 1 July this year, replaces several former taxes and levies throughout the country.

School education continues to be free of GST, as are tuition fees for traditional courses offered by universities and other advanced educational institutions. Services provided by institutions to their students would also continue to be tax-free.

But a wide range of non-educational services provided on campus that are outsourced to third parties, such as catering, laundry, food supply, security, transportation, housekeeping, canteens, general shops, etc, will now attract an 18% GST levy compared to just 15% earlier.

Some services were tax exempt in the past and will feel the brunt of an 18% hike. Many institutions will pass this on to students by way of higher fees, according to experts.

Services such as maintenance of equipment and computers and maintenance of sports facilities on campus will also be subject to GST. And campus construction projects will also be subject to the tax.

Institutions needing to provide services to large numbers of students, and maintaining large campuses will be most affected.

In the southern state of Tamil Nadu institutions have been lobbying for the tax on outsourced services to be exempt, saying that bringing such services in-house would divert institutions from their core academic activities, as some university boards have implemented ceilings on academic fees and cannot raise fees to absorb the impact.

Impact on disadvantaged students

Naveen Chopra, chairman of the Chopras Institute of Education based in Delhi, said students will now have to pay more for good-quality education and students from economically weaker sections of society will feel the pinch.

Anubhuti Mathur, 21, from the town of Sawai Madhopur in India’s desert state of Rajasthan, is worried. She has secured admission to an MBA course at a leading management institute outside her home town and will need to pay for accommodation in a student hostel. She notes that her expenses will be substantially increased.

“I don’t come from a financially strong background. Post the rollout of Goods and Services Tax in the country, all the services made available by the colleges, universities and higher educational institutions have become costlier and this will naturally reflect in higher fees and those staying in hostels would be more affected,” she says.

Admission forms and admission and examination fees will also become costlier, though internal exams set by universities for their own students will not incur the new tax.

Academics for Action and Development, a teachers' group at Delhi University, this month wrote to Human Resource Development Minister, Prakash Javadekar, demanding that universities drop the GST charge for their admission forms. Students typically apply to a number of institutions at the same time and this will raise the cost of university applications.

"Imposition of this tax is a virtual denial of education to students coming from socially and economically weaker sections," the organisation's head, Aditya Narayan Misra, a professor of political science at Delhi University, wrote in the letter.

But some, like Chandra P Shrimali, acting director of the Gurgaon-based Management Development Institute, argue a 3% increase in taxes passed on in fees will not make a big difference.

Coaching institutes

Unlike tax-exempt higher education institutions, many of the qualifications from training and coaching institutes are not recognised and will be subject to the GST at the 18% rate, up from a 15% tax rate previously.

Manish Prasad, the son of a government teacher in the city of Bhopal in Madhya Pradesh, central India, is preparing for the engineering entrance examination. He said the new GST will affect thousands of medical and engineering aspirants all over the country.

“It is very difficult to crack competitive exams and entrance exams without professional coaching,” he said. “My father enrolled me at a leading coaching institute of the city but post GST, the rate of tax on coaching institutes has been hiked to 18%. This will be a burden for my parents.”