Will the aspirations of the larger populace be fed by loose purse strings? Thus wonders Ashwin Ravindranath, Senior tax professionals, Ernst & Young. “The last Budget was preceded by a build-up of momentum of expectations in the education space, with the ringing in of the new Government’s 100-day plan,” he reminisces, during a recent pre-Budget email interaction with Business Line .
While the substantial share of addressing these wants lay at the door of the Ministry of Human Resources Development (MHRD), the Finance Minister on his part sought to “create a competitive, progressive and well-regulated education system of global standards that meets the aspiration of all segments of the society,” adds Ravindranath. “Noble sentiments that found some shape in the Budget 2009 proposals.”
The run-up to the current Budget is however punctuated by the increasing voice of the State Governments for regulation of fees and student admissions in Deemed Universities (DUs) and cries for abolition of the concept of DUs in totality, he observes. “This, while seemingly unconnected with fiscal allocations and taxation in general, is however symptomatic of the existential threat that several institutions, both good and bad, are grappling with.”
Excerpts from the interview.
On reform vs regulation.
The action in Indian education has progressed from well-intentioned agendas of reforming education regulators to agendas for greater control and more regulatory stakeholders, while investor interest continues to surge in the corporatised portions of the sector.
The debate for reform versus regulation may continue unabated for some time to come, but effective reform needs to vacate the vice-like grip of ineffective regulators, while ensuring accountability and transparency.
On DTC proposals.
A fiscal devil is in the details – a proposal under the Direct Taxes Code (DTC) would leave the already poorly-funded sector gasping for survival. The DTC conceives of an income-tax levy at the rate of 15 per cent on the surplus generated from permitted welfare activities, such as education. Clearly, this is a retrograde step that must be rolled back, given its apparent conflict with the objective of enabling universal access to quality education.
On the ‘charitable’ quandary.
Amongst other ills plaguing the sector is a cash-based sub-economy – a situation caused in part by vested interests and the confused identity of a legitimate business made to operate under the not-for-profit garb.
An unwitting outcome of the consequent unwelcome attention from Indian tax authorities has been litigation aimed at taxing exempt institutions, by questioning whether such institutions can be considered charitable, if their operations result in a surplus.
Clarity in law is as much needed as rigor in enforcement; the former to avoid unwarranted litigation, the latter to address the dealings in shades of grey.
On the indirect tax burden.
Clear and express output and input service tax exemptions to the entire education supply chain are also fiscal measures that need statutory blessing to reduce the burden of sunk indirect tax cost.
On the need for a holistic approach to the taxation of education.
The education sector is in a dilemma whether to look to the future and lobby for change or look for certainty and security in status quo on the fiscal side. The latter, while desirable merely on account of the exempt status, will leave the malaise unattended.
It may be time for a revamp of the taxation of education – to place it on par with priority sectors with attendant tax holidays, rather than restricted black-box exemptions currently enjoyed. But, to do so without correspondingly liberalising the sector from its regulation-mandated not-for-profit clutches would tantamount to depriving the sector of its principal incentive.
A holistic perspective to funding the universal right to primary education, enabling access of a greater slice of society to higher and vocational education, and easing funding to the more deserving but economically deprived may not be out of place.
Amidst the tumult caused by several hands in the pie of education, is all this too much to aspire for?
