Are We Taxing the Future of India with GST on Higher Education and Skill Development?

Are We Taxing the Future of India with GST on Higher Education and Skill Development?

India is home to one of the youngest populations in the world. With over 65% of its citizens under the age of 35, our demographic advantage can either become our biggest strength or a missed opportunity. The differentiator? Education and skill development.

Yet, in a vacuous policy contradiction, various aspects of higher education and skill training are subject to Goods and Services Tax (GST). A move that raises a critical question:

Are we inadvertently taxing the very future we claim to be nurturing?

Tax Policy is in direct contradiction with National Priorities, especially when AI is a non-negotiable skill and requires mass-level adoption across sectors

India’s leading initiatives, such as Skill India, Digital India, Startup India, and Make in India, are built on the idea of creating a world-class, skilled workforce. But GST’s applicability to educational and skill-building institutions undermines this mission.

We must realize that ultimately, it is the students who may be the weakest link in this chain, who are bearing the brunt of this tax. This is the section that should only be encouraged, as this entire process is meant to empower them. How do we explain this? And how does this make sense for the students who come from underprivileged sections? In my own experience, many of them don’t understand the details; all they know is that the upskilling opportunity is beyond their reach, and letting it slip is certain, just like so many other necessities they’ve had to forgo. 

While primary education is exempted, higher education and vocational training aren’t so lucky. Further, many services used by the institutions, such as outsourced support, certification, digital platforms, e-learning tools, and infrastructure, fall under the GST ambit and are taxed at 18%. This further increases the cost for students. 

While there may be arguments in favor of taxing higher education, imposing a high 18% tax overlooks the realities of our country’s diversity and socio-economic complexity. Such a burden is a huge risk in discouraging access to upskilling for underprivileged sections of society. At a time when the nation should be promoting higher education with full commitment, the rationale behind taxing educational courses appears weak and poorly thought out.

The AI Revolution Demands Urgent Investment in Skills

As we stand in the middle of a phenomenal AI-driven economic transformation, India must exponentially raise its focus on technology and digital skill-building to shape its future.

Across the globe, world leaders are integrating AI into national policies, investing billions into reskilling their workforce in artificial intelligence, data science, cybersecurity, and automation.

To remain competitive, India needs not just more technologists but a workforce that is AI-literate across all sectors, from healthcare and finance to agriculture, education, and public services.

And yet, the upskilling courses offered by institutions on the cutting-edge training are taxed heavily under GST. This is not just a financial burden; it’s a policy mismatch in the age of exponential technological disruption.

Skill development in emerging technologies like AI, cloud computing, blockchain, and robotics should not only be encouraged, it must be incentivized rather than taxed if we are to build a future-ready workforce.

The Digital Irony: Taxing Online Education in the Digital Age

The pandemic showed us that digital is the future of education. Yet, the tools that power online learning, such as LMS platforms, video conferencing software, creative tools, cloud storage, etc., are all GST-applicable. At a time when we should be incentivizing digital education to bridge the urban-rural divide, we’re making it more expensive.

What the World Is Doing Right

Globally, many developed nations exempt zero-rate educational services. Australia, Canada, and Singapore do not levy their equivalent of GST or VAT on most educational offerings. Here are some more details -

Their rationale is simple: Education is a public good, not a luxury.

India must take a cue from this and stop treating higher education and skill development as revenue-generating commodities. 

The Case for Reform

As we place our trust in the current administration, we must speak with one voice to our leaders: If we truly wish to honor the dreams of our youth and transform India into a global hub of knowledge and innovation, we must act boldly and we must act now. Here's what we need to make that future a reality:

1. GST exemption on all core education and skilling services, including digital tools and certifications.
2. Zero-rating for recognized skill development organizations across the country.
3. Simplified compliance for educational institutions to reduce administrative burdens.
4. Targeted incentives for institutions operating in underserved and rural areas.
5. Policy alignment with AI skilling goals is needed to ensure tax breaks and funding flow to institutions teaching cutting-edge technologies.

I would like to leave you with this….

Taxation is a powerful policy tool, but it must align with national goals. In the case of GST on higher education and skill development, it is doing the opposite. We are, quite literally, taxing our own potential.

Education isn’t just an economic investment, it’s a national responsibility. And it’s time our tax policy reflects that.

“Padhega India to Badhega India: An empowered mind builds an empowered nation.”

Disclaimer: The views expressed in this article are my personal reflections, shaped by my experience in offering upskilling opportunities in the market, a space I am actively involved in. I recognize that many other critical areas also need attention. I believe that addressing these challenges with focused intent is essential for driving meaningful and lasting progress.