Education Ministry intervenes as IITs receive GST non-payment notices
The Ministry of Education has intervened following the issuance of Goods and Services Tax (GST) non-payment notices to academic institutions, including the Indian Institute of Technology (IIT). A government official told the Economic Times that "the ministry of education has taken up the matter with the finance ministry. It is looking into it." The Directorate General of GST Intelligence issued these notices for the period between 2017-2022.
Notices seek explanation on non-payment of tax
The GST notices served to academic institutions, including IIT-Delhi, seek an explanation for non-payment of tax on funding support for research. These institutions typically receive two types of funding: one not specific to any particular subject and another tied up to a specific area of research or product with commercial application. The notices pertain to the latter type, which was taxable even under the previous service tax regime.
Government's stance on GST for research grants
The government has previously clarified that grants or donations without any specific obligations for the recipient are not considered taxable services under GST. This clarification comes in light of the recent notices sent out by the Directorate General of GST Intelligence. However, industry experts have questioned this levy on research grants received by academic institutions.
India's R&D funding lags behind other countries
India's expenditure on research and development (R&D) is significantly lower than that of other developing BRICS nations. In 2020-21, India spent only 0.64% of its GDP on R&D, compared to Brazil (1.3%), Russia (1.1%), China (2.4%), and South Africa (0.6%). Most developed countries allocated more than 2% of their GDP toward R&D, highlighting a potential area for improvement in India's academic sector.
Tax experts weigh in on GST notices
Tax experts have noted that similar issues have been raised previously regarding various charitable institutions. Pratik Jain, a partner at PwC India, stated that "the key aspect here is to see whether research was done 'for' someone or not." He suggested that funds received from overseas donors in foreign currency could qualify as an 'export' if it's a 'service' transaction, and expects the GST Council to address this issue.
