Taxing Education

The Union Budget for 2012-2013 has amended the service tax provisions of last year's budget by increasing the tax rate from 10% to 12% across all services, and added a few more services to the list.

There is also a 'negative list' of services which do not come under the service tax umbrella - one of these pertaining to educational courses makes me curious. As per the stipulation, services by way of –(i) pre-school education and education up to higher secondary school or equivalent; (ii) education as a part of a curriculum for obtaining a qualification recognized by law; and (iii) education as a part of an approved vocational education course, are not to be taxed.

In this context, the Government considers all autonomous institutions (not recognized by the UGC) imparting Diplomas or Certificates at any level of education beyond higher secondary school to be 'unrecognizable by law'. I have several quarrels with this opinion.

For a qualification of a graduate level awarded by a reputed institution, whether or not affiliated with a Government recognized institution, to not be considered either 'essential education' or a 'recognized qualification' is a travesty of the concept of education.

For a similar qualification of a post-graduate level to not be considered 'recognized qualification' is a travesty of the concept of education - the IIM, Ahmedabad, one of the best B-schools in the world awards a Post-Graduate Diploma in Management. Why should some of the best minds of the country who will probably go on to contribute significantly to society, economy and government pay an extra Rs 1.6 lakhs over the Rs 13 lakhs they are already paying as fees? What exactly is the Government doing to earn it?

Owing to the ambiguity around terms like 'vocational education' and 'recognized education', many institutions which may not come under the service tax umbrella as per 'definition' charge the students for service tax anyway, in case they get caught on the wrong side of the 'interpretation' of the stipulations. For example, I could argue that education in journalism is a vocational course. Some very reputed journalism and mass communications schools in the country have now begun to add service tax to their fees - why should I pay it?

It is the state's responsibility to educate - yes, primary and secondary school education must remain the priority, but please don't try to improve your dismal fiscal situation and off-set lakhs of crores of wasteful spending / embezzlement / dole being handed out to non-performing and / or corrupt government organizations and officials by taxing those very students who can become better academics, professionals, journalists and scientists by obtaining a higher education from whichever institution they believe educates them the best! The irony is that these very students may go on to pay the highest taxes as working professionals later - yet again funding the state's fiscal indiscipline.

India has, over the past decade, begun to dress progressive - we now need to act it. We need to stop subsidizing the state's mismanagement of its affairs and its corruption by taking money out of the pockets of people who will probably do more good for this country than all the netas of the government together. Bonafide and legitimate educational courses, academic or vocational, of any type or at any level, must NOT be taxed. If there is any suspicion regarding the authenticity of the course, each case should tackled separately, or systems should be improved so that fraud does not become rampant.

If the fragmented model is causing problems, or if the state is unable to manage the quality or number of educational institutions and courses, take a few lessons from Finland - ALL Finnish universities and polytechnics are state-owned and receive a majority of their funding from the government. The universities are governed by the Universities Act but have full autonomy in designing their own syllabi and curricula, in internal administration, and in admitting their students. There are no tuition fees and all students are eligible for study grants from the state. Finland's strategy towards education - construct a publicly funded comprehensive school system without selecting, tracking, or streaming students during their common basic education, recognize that "education is a society's greatest investment and that good teachers and educators should be compensated accordingly”, prohibiting selective admission based on fees and stringently monitoring the quality of teaching and other aspects of educational institutions.

Most Indians reading this last paragraph would purse their lips and shake their heads resignedly - how can anyone expect so much from the Indian state? Never mind, I am only requesting that simple things like the Direct and Indirect Tax Laws be perfectly clear in wording so that lay people don't have to take 'calls' on whether on not to charge or pay taxes (hire two smart people from an excellent institution for 'higher education' in finance or management, pay them well - he / she will do wonders to improve those frustratingly ambiguous and questionable documents that are the Income Tax Act and the Finance Act), and that I not be asked to give the Government my hard-earned money for a higher education that it is doing nothing to aid or encourage.