In the initial phase of August, the Directorate General of GST Intelligence, shortly known as DGGI, sent notices for unpaid Goods and Services Tax (GST) totalling ₹220 crore to 7 premier institutes in India. These institutes are – IIT Delhi, Punjab University, The Centre for Sponsored Research and Consultancy (Anna University), Technology and Research Academy Amrita Vishwa Vidyapeetham, Kalasalingam Academy of Research and Education, and Sree Chitra Tirunal Institute for Medical Sciences and Technology. These institutes have received show-cause notices.
Background of the GST in the education sector
It was not before July 1, 2017, that GST was introduced in India, with the objective of unifying multiple indirect taxes into one tax regime. But, the integration of GST has not been without complexities, specifically in sectors like education, which have typically been either tax-exempt or subject to concessions. Educational Institutions have been perceived to enjoy tax exemptions on specific activities and services they provide, but the scope of these exemptions is often a grey area.
The confusion that surrounds tax liabilities for non-core activities, including consultancy services, renting out promises and also other commercial understandings, has led to friction between institutions and tax authorities.
Details and notice
The total unpaid GST claims of ₹220 crore enclose different services and it is rendered by these institutions. Among all the 7 IIT institutions, Delhi University received the highest notice, which contributed to the overall amount. The notices have been issued for unpaid GST on consultancy services, rented properties, along other activities that fall outside the purview of core education services. The tabulation below provides a descriptive insight into GST percentages after issuing notices.
| Institute | Unpaid GST (in crores) | Nature of Activities in focus |
| IIT Delhi | 120.3 | Consultancy services, commercial proper |
| Amrita Vishwa Vidyapeetham | 63 | Industry tie-ups, consultancy, renting premises. |
| Shanmugha Arts, Science, Technology & Research Academy | 10 | Consultancy, research, specialised training programs. |
| Kasalingam Academy of Research and Education | 10 | Consultancy, sponsored events, research services |
| Sree Chitra Tirunal Institute for Medical Sciences and Technology | 7.3 | Medical research, consultancy services |
| Centre for Sponsored Research and Consultancy (Anna University) | 5.4 | Sponsored research, consultancy, and advisory services |
| Punjab University | 4 | Facility rentals, research collaborations. |
The basis of the claims
The action of DGGI is based on the services provided by the institutions that attract GST but have allegedly not been taxed as required. These services include research collaborations with industries, consultancy, renting out properties for non-educational purposes as well as organising non-academic events. As per the GST law, it is seen that these activities, being commercial in nature are granted to educational services.
Let’s put this into a context: e.g. consultancy services offered by the faculty to industries or government bodies are considered a taxable supply under GST. In similar ways, when the institutions rent out their premises and provide other facilities for events or commercial activities, they are liable to pay GST. As per the understanding of GDDI, it is highlighted that these institutions failed to fulfil their GST liabilities for such activities over the past few years, which is why it led to a hefty demand for notices.
IIT Delhi’s case
IIT Delhi, being one of the premier engineering institutions in India, happens to engage in numerous non-core activities, including industry tie-ups, renting out its premises for conferences and events, etc. It received the largest share of the notice, where the total amount is 120.3 crore.
The potential issues arise from consultancy projects, which form a major source of revenue for the institute of IIT. Faculty members more often work on projects for private and Government clients, for which they charge fees that should attract GST, though conducted under the institution’s banner are commercial in nature, thus liable to GST.
Legal and financial implications
The unpaid GST notices have raised serious concerns about the financial implications for these institutions of IIT. Being public entities, most of them operate on government funding. Their revenues are also tightly regulated. The sudden demand for unpaid GST can have severe effects on these institutions and put a strain on their budgets, which can divert funds meant for research, scholarship as well as infrastructure development.
Public ramifications
Operational impact: Payment of the unpaid GST could lead to budget cuts in non-core academic programs and research initiatives. Institutions might also face challenges in raising funds for expansion and development activities.
Legal challenges: After the show-cause notices, the institutes are expected to challenge the notices through legal avenues. Educational institutions may argue that the activities in question fall within their education mandate, thus qualifying for GST exemptions. But, the legal battle could be lengthy and expensive for these institutions.
Government involvement: The Government might need to step in and clarify the GST exemption rules for educational institutions. As of recent updates, ambiguity surrounds what constitutes educational services and commercial services which leads to such disputes.
GST and educational institutions: what is next?
The notices issued to these institutes highlight the ongoing debate about the applicability of GST in the education sector. While core educational services are exempt from GST, activities that generate additional revenue for the institutions are subject to taxation. The problem lies in determining the boundary between educational services and commercial activities.
GST exemptions in the education sector
| Service | GST applicability |
| Core educational services (tuition fees, etc.) | Exempt |
| Consultancy and research services | Taxable at 18% GST |
| Renting of premisses for non-educational purposes. | Taxable at 18% GST |
| Organising commercial events. | Taxable at 18% GST |
Speculations around tax notices to IITs while Patanjali gets IT exemption from GoI show the Government’s skewed priorities.
In 2021, the Income Tax Department granted 5 years of tax exemption to Patanjali Research Foundation Trust. This Trust is officially recognised as a research association for scientific research. The move highlighted in a notification dated July 12, 2024, signifies a policy decision that influences the way scientific research is funded and incentivised in India.
Naya Bharat, Modi ka Bharat
Patanjali : Five year Tax exemption
IIT Delhi : Notice to pay 120 Cr GST on Research Funds pic.twitter.com/PSS8j119yy
— Veena Jain (@DrJain21) August 19, 2024The exemption, as approved by the Central Board of Direct Taxes (CBDT), applies to the Patanjali Research Foundation Trust. The Government of India (GoI) finds this valid for the assessment years 2022-23 to 2027-28. The tax benefits are granted under Section 35 of the Income Tax Act, 1961, which pertains to deductions for expenditure on scientific research. This section allows for a deduction equal to 150% of any sum paid to a recognised research association.
An undemanded comparison with GST notices to IITs is a concern. In contrast to this positive development for Patanjali, there have been skewed aspects related to GST notices issued to IITs. The notices, which have raised concerns over GST compliance, suggest a different narrative regarding government priorities in the domain of academic institutions.
The IITs are renowned for their contributions to scientific and technological research and have faced scrutiny over their GST compliance. The disparate treatment of Patanjali Research Foundation Trust and the IITs reflects a skewed prioritisation in government policies. While the tax exemption for Patanjali shows support for traditional research areas promoting Ayurveda, the GST notices to IITs seem to present an impediment to establishment institutions.
Sports organisations are exempted from tax even though earning millions.
In India, sports organisations, particularly involved in the promotion of elite sports have been granted significant tax exemption, including relief from GST. As per reports, these exemptions are generally provided to promote sports development, infrastructure growth as well as international sporting events. The idea behind this exemption is to facilitate the growth of sports and attract foreign investment.
The Board of Control for Cricket in India (BCCI) is one of the most prominent beneficiaries of GST exemptions. It is the governing body of cricket in India. Cricket, being the most popular sport in the country, receives favourable treatment in terms of taxation. Although, the BCCI operates as a private body generating significant revenue, earning 18,700 crore Indian rupees (US$2.2 billion) in 2023 and 2024. This body has benefitted from tax exemptions. The reports stated that the BCCI was exempted from paying service tax for hosting major international tournaments like the Indian Premier League (IPL) under the banner of sports promotion.
The Indian Olympic Association (IOA) is another such example, which oversees India’s participation in the Olympics and other international sporting events. It also benefits from GST exemptions. It is found that the organisation is exempted from taxes for activities related to the training and development of athletes, which is categorised as a service to society under the tax guidelines. In 2019, the IOA recorded an income of nearly 137 million Indian rupees.
On the other side, government-led sports infrastructure projects, including building stadiums and training facilities for international events, receive tax waivers or deductions. Some of the prominent examples are – Jawaharlal Nehru Stadium in Delhi and the Sardar Patel Stadium in Ahmedabad. The establishment of these stadiums benefitted from tax exemptions to reduce the financial burden on the organisers.
It is analysed that, despite the intention to promote sports, these exemptions should be criticised for being skewed towards elite sports, including cricket, while grassroots sports development, local leagues and education sectors (IITs) face more financial strain. The IITs in India contribute in many ways, be it for research and development, economic growth, technological advancements, or market competition. In 2022, India ranked third globally for research output, with over 300,000 publications.
However, such dichotomies should be questioned about the consistency and fairness of government policies in supporting research and development. There is a need for tax benefits to be closely examined and distributed to support broader public and educational initiatives rather than focusing on commercial sports ventures. If these fields need exemptions from tax, the IITs should also be analysed properly to offer some relief.
