GST Exemption on Research Grants Welcomed by Education Minister Pradhan; Ministry Clarifies on School Affiliation

Earlier, Union Finance Minister Nirmala Sitharaman had announced that the GST Council had decided to exempt funds given for research and development to Central and State Government universities

Union Education Minister Dharmendra Pradhan took to X (formerly Twitter) to express his appreciation for the recent exemption of GST on research and development grants to universities and research institutions. He wrote: “Exemption of GST on research and development grants to universities and research institutions is a welcome news, particularly for our academic and research community. Gratitude to FM @nsitharaman ji and the #GSTCouncil. This will surely ease tax burden and ensure availability of more funds to our HEIs for undertaking cutting-edge research. Hon’ble PM Shri @narendramodi ji’s govt. is working to revolutionise and democratise the research and innovation landscape for fulfilling the vision of Sashakt, Aatmnirbhar and Viksit Bharat.”

Earlier, Union Finance Minister Nirmala Sitharaman had announced that the GST Council had decided to exempt funds given for research and development to Central and State Government universities, as well as institutions that have obtained Income Tax Exemption, from GST. This decision is expected to provide significant relief to academic and research institutions, allowing them to focus more on innovation and less on financial burdens.

The Finance Ministry released a statement, noting the specifics of the decision:

The GST Council recommended the exemption of the supply of research and development services by a Government Entity, research association, university, college, or other institution notified under clauses (ii) or (iii) of sub-section (1) of section 35 of the Income Tax Act, 1961. This exemption applies to research funded by Government or private grants.

The decision also includes a provision to regularise past demands on an ‘as is where is’ basis.

In addition to the GST exemption, the Council clarified issues regarding affiliation services:

Affiliation Services Taxable: It was clarified that affiliation services provided by educational boards like CBSE are taxable.

Exemptions for Government Schools: Affiliation services provided by State or Central educational boards, educational councils, and other similarly placed bodies to Government Schools will be exempted prospectively. Past issues, from 01.07.2017 to 17.06.2021, will be handled on an ‘as is where is’ basis.

University Affiliation Services: The Ministry further clarified that affiliation services provided by universities to their constituent colleges are not exempt from GST under the notification No. 12/2017-CT(R) dated 28.06.2017. Such services will now attract an 18% GST rate.