Ahead of the Union Budget, the ministry of skills development and entrepreneurship has proposed amendments in direct and indirect tax rules and Companies Act 2013, with a view to creating a larger pool of employable workforce, and harnessing the demographic dividend.

On the direct tax front, the ministry has called for inclusion of skilling programmes in the Section 10 (23C) of the Income Tax Act. At the moment, skilling programmes are not specifically included in the definition of education, and hence, they are not exempt from income tax. Not-for-profit universities and educational set-ups are, however, exempt.

The ministry has asked for adding a new section in the IT Act for “for-profit institutions” conducting skill development courses by giving them an option to pay lower taxes on fulfilment of some criteria such as meeting pre-decided limits of turnover. “The proposed amendment will provide encouragement to training institutes, thereby giving a boost to entire skilling sector,” the ministry said, in a presentation to the finance ministry.

“Introducing specific explanation will leave no ambiguity and will provide direct benefits to training institutes conducting skilling programmes. This would lower the cost of institutes and will benefit the trainees,” said the ministry in the document, a copy of which is seen by FE.

Besides, there’s a proposal to consider employment services under “merit services” category with a reduced GST (goods and services tax) rate of 5%. The decision on GST rates are taken by the GST Council.

The ministry has also asked for exclusion of housekeeping services provided by the e-commerce companies like Urban Company, No Broker and House joy from the ambit of Section 9(5) of the CGST Act. It has also suggested consolidation of all the skilling programmes conducted under the CSR (corporate social responsibility) under one regulatory body.

The ministry noted that inclusion of housekeeping services provided by the e-commerce companies in the GST ambit has created a disparity in taxation between online and offline service providers, discouraging trained professionals from entering the formal economy. “Removing this requirement will improve their earnings and reduce the compliance burden on e-commerce companies,” said a ministry document seen by FE.

Currently, various kinds of courses are conducted independently and there’s a need to regulate all such courses and bring them under the supervision of one regulatory body. The Section 125 of the Companies Act allows for a list of activities permissible for the purpose of CSR, including educational activities.

On the indirect tax side, the ministry has sought exemption to certain essential services provided to the skilling institutes. This includes leasing and hiring of equipment, education and training services, renting of premises, transportation, housekeeping, security, etc. “This will ensure availability of quality equipment which is pivotal to the seamless delivery of skilling services through online, offline and hybrid modes by a skilling institute,” the document said.

In addition, there’s a proposal to extend the exemption to services provided by skilling institutions to students, faculty and staff. In total, the MSDE has asked for six amendments in the indirect tax regime.

In total, the ministry has proposed 8 changes in the IT Act, as per the presentation sent to the finance ministry.

Source: The Financial Express