The 18% GST rate on vocational training courses is for employees as well as employers who provide training and education to their employees as a part of their Customer Social Responsibility (CRS).
According to experts, the applicability of the Goods and Services Tax (GST) is highly imposed on the enrollment of workers for the government’s skill development program as it also destroys workers and industries.
Currently, employers are sponsoring their employees for vocational training or for individuals who enroll themselves for courses that will get the job, they will have to pay 18% GST on enrollment.
Typically, the Ministry of Finance plays a role of benefactor and sponsors training fees, but many companies also provide funding as an element of their CSR to leverage the skills of their workers. However, payment of 18% GST on them is beneficial for the companies.
The students found an 18 percent GST on the training fee for themselves or by sponsors, which is for postponing or canceling vocational training. The training provider provides basic vocational training to employ under-qualified and unskilled youth, ”said GA Soman, head of Don Bosco Training Academy in Mumbai and former president of the Indian Welding Institute (IIW).
The fee for professional training is higher when the students who enroll for them have to pay 18% GST along with the course fee and most of the students are from below and outside family hence it signifies financial complexity for them. The course fee for a basic steel welding is around Rs 45,000 per student and training fees in organized sectors like diamond and textile and unorganized sectors like pipelines between Rs 20,000 and Rs 25,000. Tax applicability on them increases financial burden on students and their families.
IIW has appealed to the government to cancel the GST on skill development courses and bring them in the exempt category from the GST. Currently, industries such as diamond processing are also facing heavy GST, especially at a time when the absorption rate decreases.
“The industry is paying 18 per cent of GST on all processed diamonds certified by a certified agency. When these certified diamonds are exported, the exporter gets an input credit which is less than the GST paid on certification as buyers do not pay tax. As a result of this GST has accumulated and hence, the working capital of the diamond processor is hindered, we have proposed to the Government to reduce the GST on certification of diamonds to 5 percent, ”said Colin Shah, Vice President, Gem and Jewelery Export Promotion Council Expressed (GJEPC).
Expenses incurred by the diamond processor on training and skill development are subject to reimbursement. Skill development in the diamond industry is tracked and managed by the National Council for Skill Development (NSDC) which completely exempts GST from vocational courses.
The Textile Sector Skill Council (TSC) was established in the year 2014 as a subgroup of National Skill Development Corporation (NSDC), has enrolled 147,678 trainees under various programs brought in and 135,391 for well trained professionals Certified candidates. However, at present, the country’s economic slowdown has hindered the skill development of a new worker as well as trained employees.
“The Government’s Skill India mission was aimed at building professionals for the long term. The statement by Cloth Manufacturers Association of India (CMAI) President Rahul Mehta said that the slow rate of absorption of skilled workers is a temporary phenomenon, which will go away in six months.