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Indian education agents searching for GST solution after tax code shake-up

Passing on GST on to the institution and a plea for tax exemption are being touted as possible solutions for Indian education agents’ increased tax bills, as the country continues to readjust after a major overhaul of its tax system.

Indian education agents are trying to find a solution to avoid additional tax costs. Photo: Pexels

Several institution representatives reported having received commission invoices with additional fees and services

After implementing GST on 1 July, India has had ongoing issues and confusion around how the tax would apply to overseas education, with agents complaining it unfairly impacted their earnings.

“[In other countries], the moment the invoice is issued on a foreign entity and paid from overseas in forex, the service becomes an export and thus the GST becomes inapplicable,” explained Global Reach managing director Ravi Singh.

“[But] in India… to qualify as an export, the place of deliverance of service needs to be established beyond the other conditions. This is where the opinions differ and some even begin interpreting the service as that of an intermediary.”

The new GST means that education agents will either pay an additional 3% tax on top of the 15% they paid during the previous taxation system, or, as reported in August by The PIE News, 18% for those who previously believed they had a services export exemption.

“It is imperative that access to education shouldn’t be made more expensive by indirect taxes”

In a release to members, AAERI president Rahul Gandhi said his organisation had pursued the government to extend current exemptions for services relating to education admission, which apply up to secondary school only, to all other sectors.

“Access and availability of quality higher education for an Indian budding youngster plays a pivotal role in strengthening the social and economic fabric of India,” he said.

Gandhi argued that by applying GST to agents, the cost would inevitably pass onto the institution which in turn would be passed onto all international students through increased fees, making it harder for Indian students to access higher education.

“It is thus imperative that access to such education should not be made more expensive by subjecting it to indirect taxes… Providing GST exemption only towards the primary and higher secondary education and excluding [higher education] courses is not in the interest of the country.”

His prediction appears to have already come true, as several institution representatives reported having received commission invoices with additional fees and services, but it seems unlikely they plan on tolerating fees outside their already-signed agreements.

“Some of my partners did present invoices that tax, and I had to go back to my finance legal department and said ‘what can we do?'” PACE University’s international admission director Andre Cordon told delegates at the recent AIRC conference.

“They went back to me and said what does the contract say? They go by… the contract which said we will pay X amount per commission per student.”

Cordon concluded that the contract didn’t stipulate additional fees and taxes, resulting in him telling his agents to remove the charges, adding an exception would not be made for Indian agents.

“I don’t think I can… accommodate taxes and that type of structures at this point, so it’s something to consider,” agreed Mary Marquez Bell, vice president for enrolment services at State University of New York.

According to Sannam S4 co-founder and CFO Kapil Dua, however, the other option, an exemption for education agents, also seems unlikely.

“Gut feeling, I don’t think they will get it,” he said.

“Opinions differ and some even begin interpreting the service as that of an intermediary”

“I think it is sitting at a more political level rather technical. New GST law has surely increased the rate from earlier 15% to 18% now, it was still taxable under the earlier Service Tax law.”

Dua told The PIE News that while Gandhi’s points were relevant, in the mid- to long-term he believed they were not sustainable and a complete exemption would be a tough ask.

A tough ask, yes, but not entirely impossible, he added.

“Government is under a lot of pressure from various industry leaders talking about short-term impact. They are considering and listening to concerns raised by all industries in GST council meetings.”

India currently represents the second highest source market for international students, behind only China, however, recent reports indicate that number is dropping.

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