After the 54th Goods and Services Tax (GST) Council meeting on August 9, 2024, exempted research funding for higher educational institutions and research centres from the levy, private higher education institutes are a hopeful lot.
These institutes say the decision is a major step towards alleviating financial pressures, enabling them to focus more on innovation and high-impact research initiatives. However, they also highlight that there is significant scope still left to offer relaxation in other aspects such as college fees including in private universities.
“The recent exemption of GST on research grants in educational institutions has been broadly welcomed within the academic community… Reducing the tax burden allows institutions to invest with greater confidence in potentially groundbreaking and risky projects,” said Bhuvnesh Kumar, dean of research at Sharda University.
Kumar added tjat the removal of GST from educational fees will also help students. “Eliminating this tax could alleviate financial burdens on students and educational institutions…The financial burden on students and their families would be greatly reduced if the GST on food and lodging expenses was also eliminated,” he added.
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To be sure, the exemption applies to universities and research centres that have been established by state or Union government law. The decision was taken after the Directorate General of GST Intelligence recently sent show-cause notices to seven prominent academic institutions including Indian Institute of Technology (IIT) Delhi for unpaid taxes on research grants given since 2017.
Nevertheless, educationists also say that although exemption would no doubt promote scientific temper and enhance research and development, it would create a different challenge for privately run universities.
“Such exemption would deprive the research institutions and universities from claiming input tax credit on purchases made using grant proceeds and, in turn, mean research project operational costs would be increasing for them. Further, tax compliance and record keeping would also be cumbersome for these organisations,” said Trilochan Tripathy, professor of finance at XLRI Jamshedpur.
Exemption of GST on research grants may create disparities between public and private institutions or universities, he added.
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The GST Council also announced tax cuts on several items and services, such as cancer drugs and travel by helicopter. After the conclusion of the council meeting, Union Finance Minister Nirmala Sitharaman said that the reduced rates will apply prospectively.
In Budget 2024, Sitharaman announced a record Rs 1.20 lakh crore for the education sector. However, the allocated amount for FY25 is Rs 9,091 crore less than the revised estimate for 2023-24 and translates to a nearly 7.26 percent decline compared with the previous revised estimates of Rs 1,29,718 crore.
The Indian Institutes of Technology, the government-run public technical establishments, received Rs 10,324 crore for FY25, against Rs 9,661 crore pegged in the BE for FY24, which was later revised to Rs 10,384 crore (RE).
Allocation to the University Grants Commission (UGC), the higher education regulatory body, was reduced to Rs 2,500 crore. Last year, UGC was allotted Rs 5,360 crore and was later revised to Rs 6,409 crore (RE).
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