Education in India is a social service rather than a commercial one. Education is deemed fundamental to the well-being and development of the nation. Keeping that in regard, the government tries to provide tax exemptions via an easy gst registration process or by reducing tax rates to those providing educational services.
The government is under the constitutional obligation to provide free and compulsory education to all children who are under the age of 14. This is designed to incentivise and promote educational services.
However, the commercialisation of education in today’s time is also a reality. Educational institutions in India are generating high profits. Furthermore, the government wants to make a distinction between core educational that is essential to a person’s development and ancillary education and training that is optional.
Under the new GST rules, taxes apply to different kinds of educational services under different rates according to how essential they are deemed. Let’s take a look at the position of corporate training under the GST law.
What Is Corporate Training?
Corporate training refers to the training of employees in job-related skills that help them in their duties and further their careers. For example, in an IT company, employees may undergo training via cloud computing or machine learning to help meet the company’s business goals.
Corporate training can be done in-house in which the company’s own employees train other employees, or it can be outsourced, whereby a company hires a corporate trainer or a training company to teach their employees.
If corporate training is done in-house, the company does not need to pay GST. However, they will need to pay the salaries of the employees conducting the training. Overall, outsourcing corporate training can be cheaper for an organisation.
Different Types Of Education And Training Under GST
Even though educational service has not been defined by the CGST Act, 2017, according to the Supreme Court in the case of Lok Shiksana Trust v. Commissioner of Income Tax, education is the process of training and development of knowledge, skill, and character.
The Central Government released three notifications relating to the taxation of educational and training services on 28th June 2017.
According to these notifications, educational and training services have been divided into six groups:
- Pre-primary education services
- Primary education services
- Secondary education services
- Higher education services
- Specialised education services
- Other education and training services and educational support services
The group of other educational and training services and educational support services has been further divided into six categories:
- Cultural educational services
- Sports and recreation education services
- Commercial training and coaching services
- Other education and training services
- Services involving examination for admission to educational institutions
- Other educational support services
Hence, we can conclude that, for GST, corporate training services fall under the category of commercial training and coaching services.
Taxation Slabs For Educational Services And Training
According to GST laws, four different tax rates can be applied to educational and training services. As a whole, educational services fall under a blanket rate of 18% GST. This rate applies to all kinds of services as defined above.
However, there are certain exemptions and exceptions to this rule. Services that are provided by “educational institutions” to their staff, students, and faculty are entirely exempt from being taxed under GST.
We can safely conclude that corporate training does not qualify for GST exemption because it does not consist of the type of education provided in schools, and does not offer a “qualification” that is recognised by any law. Corporate training is not necessarily part of any approved vocational education course either.
Some aspects of educational services are taxed at a higher rate of 28%. These services include instruments, apparatus and models, designed for demonstrational purposes (for example, in education or exhibitions), unsuitable for other uses.
Taxation Of Corporate Training
Since corporate training does not fall under any categories that are taxed under other tax rates, it will be taxed under the overall umbrella bracket of “educational services” i.e. 18%. This is slightly higher than the earlier service tax rate of 15% applied to educational services.
Since the applicable tax rate for corporate training has increased, corporations may want to find ways to make it more cost-effective. Nowadays, corporate training can be conducted online through webinars and digital course materials to save costs.
You may also outsource corporate training to companies based in cheaper countries who can provide quality services.
If you provide corporate training, then you need to know the applicable GST tax rate along with any ITC that you can claim for your services. You should also find out more about the gst certificate download procedure to ensure your business fulfils tax obligations.