Higher educational institutions should be exempt from GST

A recent survey report on “Value of Education” from international bank HSBC showed Indian parents spend over Rs 12 lakh on schooling and higher education of their children. While the small size of the survey participants cannot indicate any macro parameters for larger conclusions, the report, all the same  shows how Indians, like many of their counterparts in Asia, are willing to sacrifice leisure and extra expenses, to save enough for putting their children through university. 

A senior HSBC India official was quoted as saying that in today’s competitive global job market, parents appreciate why education is important and, so, are willing to invest time and money to help their children get the best start in life. Their support shows in the personal, lifestyle and financial sacrifices they are making, the official was further quoted. 

Nearly 60 per cent of Indian parents spend only from their income and/or use up their savings, the survey showed, and noted that about one-third of the parents work extra hours, to fund their children’s school or college learning. No wonder that in such a demanding situation for parents, the gross enrolment ratio (GER, the number of young persons in higher education, compared to the total population in the 17 – 23 age group) is less than 24 per cent. In other words 76 per cent of young men and women in India are not entering the portals of higher education. Affordability and access remain insurmountable barriers.

Policy makers are looking to improve the GER in higher education by different means. But a clear set of fiscal levers is needed to encourage more people to enter higher education. Education loans comprise one such large element, but they do not help universities deliver education at a lower cost.

Institutions – public or private funded - incur expenditure for a host of services – examples being transport, food, dormitories, security, banking and related services are part of every day work. And these services cannot be treated as outside the university’s core work of education, research and training.  Also, many institutions work with industry and other providers, to offer niche training, courses or services to the students, teachers, researchers and non-academic staff too. For some reason, the Union Finance Ministry does not consider these services as core of higher education development and work. The newly rolled our GST regime has left out higher education institutions for exemptions and all the above said services will suffer such a levy. This is an unnecessary burden on the institutions which will obviously pass on the burden to students. 

Similarly, power and transport concessions, and special rates for food articles for higher education institutions are other fiscal levers that the policy makers can look at. The total revenue reduction, by offering such sops, will only be a fraction of the benefits that students and parents can earn with such right fiscal measures.