The undesirable burden of GST on students of impact education

By Rameesh Kailasam and Shivam Tandon

By 2035, India has set a target of 50 per cent Gross Enrolment Ratio in higher education through the National Education Policy (NEP) 2020. We are at 28.4 per cent as per the AISHE 2021-22 and the rate of its increase has been rather flat. The private sector has been complementing the public sector in a bid to have a globally competitive higher education ecosystem in the country. This disconnect between higher education and the real world, especially with respect to employability, has been debated now at a global scale and India is no exception. Several of India’s established institutions have also failed to place their students. A recent Business Roundtable report highlights that 70 per cent of CEOs believe colleges and universities are not adequately preparing students for the workforce. The Adecco Group’s Global Talent Mismatch Index 2022 revealed a widening gap between employer demands and available skills. The report indicates that emerging economies like India are particularly vulnerable, facing a talent mismatch score of 52 out of 100.  

In pockets across the world, small, independent, progressive, high-quality schools (‘Impact Schools’) are attempting to solve this problem through innovative curriculum, pedagogy, and asset-light models that are focused on outcomes, as opposed to inputs. This segment of ‘higher education-like’ institutions has the potential to make a significant dent in the global talent mismatch. However, systemic and administrative obstacles limit their growth beginning with a lack of recognition as providers of higher education. Services provided by all Higher Education Institutes are exempt from GST if they offer a qualification recognised by government-authorised bodies like UGC and AICTE. Everything outside this category is subject to an 18 per cent GST and this warrants attention. Applying existing norms of higher education to these new institutions will stunt their impact and will deprive the world at large of an imminent solution to a serious problem.

Also read: GST collection in May 2024 moderates to Rs 1.73 lakh crore, posts 10% YoY growth 

Global acknowledgment of the need for ‘Impact Schools’ and a focus on enabling their systematic growth in a well-governed manner is essential to solving this looming talent-mismatch challenge. There is a need for regulation, make no mistake about it. It is required to protect students from fraudulent activities and ensure a standard quality education in the country. There have been cases in the past where conmen have used an educational institution as a ruse to dupe innocent students for money. Hence the need for operating within an enabling framework by the government. 

The current Government framework regulates the inputs – faculty, infrastructure, curriculum, pedagogy – whereas a check on outcomes will serve a much better purpose. Audited placement data, financial records transparency, and quality of faculty are some parameters that can better signal the legitimacy of an institute. A consistent feedback loop from the industry on relevant skill sets demands regular updation of the curriculum almost on a yearly basis. There is no one-size-fits-all approach for pedagogy and institutes should be encouraged to innovate their teaching methods to deliver better learning outcomes for their students. Similarly, one can expect an industry stalwart to deliver a promising business course even if they are not a qualified teacher as per conventional norms. It is this autonomy that institutes are seeking to experiment, innovate and increase the employability of the students in the industry. 

However, this comes at a cost, burdened by an infructuous cost of 18 per cent GST that amounts to lakhs of rupees per student as they students cannot claim it thereby affecting affordability. This not only limits the choices students have to enroll for higher education, it also distorts market dynamics. Taxation makes one significantly more expensive than the other. Institutes running as not-for-profits offering higher education programmes along with placement support are in no way different from the traditional institutes set up. The trade-off of autonomy over recognition ends up hurting the youth of the country who find limited opportunities to explore a modern pedagogy. Notably, the industry too has started to look beyond the degrees and focus on skill sets, highlighting the need to revisit our definition of educational institutions.

What and how to regulate education comes under the purview of the Ministry of Education, which needs to allow this innovation with an enabling framework and along with a lower GST. Shifting from a restrictive to an open regime will allow the higher education landscape in the country to elevate at a global level. As per PLFS 22-23, unemployment rate is 13.4 per cent and 12.1 per cent for graduates and postgraduates respectively. There is a need to put our attention beyond degrees and focus on employability. As more of our population is entering the 18-25 years of age, the demand for higher education is on the rise and we must ensure that economic roadblocks for its supply are removed. 

To burden this model with 18% GST is grossly unfair on students besides being an infructuous cost burden and will significantly diminish affordability. The government should work out a mechanism through the GST council and should ideally exempt and if not, should consider placing such at a lower 5 per cent GST slab. The alternate is also to consider such institutes to empanel with the likes of National Skill Development Corporation (NSDC) as a skilling initiative and grant them exemption from GST.  

(The authors are CEO and Manager-Policy, respectively, at Indiatech.org. Views are the author’s own and not necessarily those of financialexpress.com.)