GST is applicable to higher education. Should higher education be taxed at all? Can we really separate the services that add value to delivery side of education and levy taxes on such services? What then are classified as services? In a generic sense, intangible products such as accounting, banking, cleaning, consultancy, education, insurance, expertise, medical treatment, or transportation are all services. Sometimes services are difficult to identify because they are closely associated with a good, such as the combination of a diagnosis with the administration of a medicine. Some services where no transfer of possession or ownership takes place when services are sold, or when they cannot be stored or transported, are instantly perishable, or come into existence at the time they are bought and consumed such as in education, is levying taxes legally tenable? In a country, where the higher education GER is just about 22 with a growing young population, how does one label education? Is it a service or an industry? The World Trade Organisation lists education as a service sector. The private sector may grudgingly accept it as an industry, for many times, the funding or financing available to industrial enterprises are not even available to education. Taxing education can be counterproductive whether we accept it as a service or as an industry, since the overheads are always passed on to the last mile. Distance education which is so vital for enhancing the reach is also considered higher education and taxed. This raises some uneasy questions. Given that the Constitution lists education as not for profit, is the State tacitly approving commercialisation? The importance of education cannot be undermined due to a majority of the population being 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 the higher education and Distance Education.
GST implemented a year back has thrown up some exciting prospects and some real concerns. The GST Law is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. Under the GST regime, the tax will be levied at every point of sale. In case of intra-state sales, Central GST and State GST will be charged. Inter-state sales will be chargeable to integrated GST. In simple words, it is an indirect tax levied on the supply of goods and services that has replaced many indirect tax laws that previously existed in the country.
Let’s see if we can draw some parallels and also draw some lessons. In a typical end product in a manufacturing context, there are multiple change-of-hands that product goes through along its supply chain, from manufacture to final sale to the consumer. Typically, purchase of raw materials, production or manufacture, warehousing of finished goods, sale to wholesaler, sale of the product to the retailer, and sale to the end consumer would build the supply chain. GST will be levied on each of these stages, which makes it a multi-stage tax. An example to quote, the manufacturer who makes cookies buys flour, sugar and other material. The value of the inputs increases when the sugar and flour are mixed and baked into cookies. The manufacturer then sells the cookies to the warehousing agent who packs large quantities of cookies and labels it. That is another addition of value after which the warehouse sells it to the retailer. The retailer packages the cookies in smaller quantities and invests in the marketing of the cookies thus increasing its value. GST will be levied on all these value additions i.e. the monetary worth added at each stage to achieve the final sale to the end customer.
What would be the value chain in education? More specifically higher education? The institute that provides education appoints teachers, provides infrastructure and other inputs. The value of the inputs increases when teaching aids are provided, experts are engaged, tools for experiential learning are provided, contemporary industry specific certifications are built in, internships arranged, all of them coalescing to create an industry ready finished product of a student. The Institute However, unlike the manufacturing context, cannot sell its products to the industry, though some institutes in the west do charge a fee per student from a prospective employer. Further, the attributes of the products could be honed by the so-called warehousing agents or finishing schools or even specialised coaching houses, who pack the products with employable embellishments and a kind of label them. That is another addition of value, after which the placement agencies present its subjects to the industries. The supply chain grows now, with the industry employing the product, after an on the job training, who then invest in the marketing of the products, thus increasing their intrinsic as well as extrinsic value.
Except for an on-the-job training by the industry who employ the products of an institute, all services rendered are in the way of honing the employability skills of an individual and hence are essential to quality and deployment in the industry. Should such services be taxed? Contrary to such expectations, the Maharashtra Authority for Advance Rulings (AAR), has levied 18% GST on coaching classes that help students prepare for engineering and medical entrance exams. In a country where a lot is left desired in our schools and colleges in terms of teaching and learning, coaching centres have taken over to supplement the gaps and have grown to proportions of parallel institutions. Admittedly they make profits. Would it not be more prudent to peg the fees they charge and democratise them, rather than kill the proverbial goose that lays golden eggs?
Manufacturing Industry, with a thrust on digital manufacturing, has undergone a phenomenal transformation in the last two decades. Large scale Automation, AI, Robotics and special purpose machine tools, have redefined job roles and rendered serval traditional ones redundant. Several manufacturers have outsourced an extent of 90% and above, their operations to other countries to be competitive in an ever-expanding market. The downside seems to be loss of jobs. IT Industry, one of the largest employers in recent times, has also been staring at a local recession, where automation enables instructions to create a repeated process that replaces an IT professional’s manual work in data centres and cloud deployments. Software tools, frameworks and appliances conduct the tasks with minimum administrator intervention rendering several, professionals till yesterday, with nothing to work for, today. Obviously, the jobs are mutating to those that require higher order skills with required numbers going down. The only way out of the puzzle is re-skilling and up-skilling. Professional upgradation of skills cost a lot of money and GST can certainly up the stakes beyond reach, for many of the aspiring.
A cursory look at the markets reveals that the Business Analytics market is expected to surpass $200 billion, with the industry in India expected to almost double by 2020, with a sizable portion of around 24 % being attributed to Big Data and contributing to 12% of worldwide analytics and data science job openings, making it the largest analytics hub in the world, outside the US. A recent study made by Online Analytics Training Institute Edvancer stated that India has approximately 50,000 vacancies for data analytics jobs, which are expected to jump to 80,000 to 1, 00,000 by the end of this year. Further, Digital Marketing will create more than 2.0 lac jobs in India in the same period. Do we really have the stock to fill this available market? A host of professional agencies out in the markets make a killing while the going is good. Can we at least spare the aspirants the burden of GST, even if it is for a limited period?