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Budget 2023: Edtech Companies Bat For Tax Cuts, Policy Interventions

Some of the demands of India’s edtech sector include continued funding support, lowering of GST taxes and incentives for further formalisation of the country’s digital learning space

Budget 2023: Edtech Companies Bat For Tax Cuts, Policy Interventions
POSTED ON January 25, 2023 11:13 AM

With the Union Budget 2023 only a few days away, expectations are rife among the edtech companies that constitute a significant share of India’s booming start-up ecosystem. Having a total valuation of over $450 billion, India’s start-up space is the third-largest in the world. As one of the fastest-growing start-up ecosystems globally, the country today boasts more than 57,000 start-ups, including unicorns and soonicorns.  

This upward growth results from various initiatives introduced by the government under the Start-up India initiative in 2016, including the Start-up India Seed Fund and Fund of Funds, which were directed towards providing capital to upcoming start-ups. Following the Covid-induced lockdowns, the government's initiatives to encourage digital learning resulted in a massive surge in demand for online learning among students across the country. This is when India’s edtech start-ups rose to the occasion.  

Vamsi Krishna, chief executive officer (CEO) and co-founder of Vedantu, has observed a shift from rote learning methods to skill-based learning in India’s digital education experience. "Technology has broken ground by making education accessible and affordable to students, especially in tier 2 and tier 3 regions," he said. 

Vamsi Krishna, chief executive officer and co-founder of Vedantu
Vamsi Krishna, chief executive officer and co-founder of Vedantu

However, with learning spaces turning away from digital platforms back to physical ones, and a prolonged funding winter that has resulted in skyrocketing layoffs and many companies shutting shop, edtech brands are now struggling to sustain their growth trajectory. Companies in this sector expect more government resources and support for edtech initiatives from this year’s budget. 

Incentivise, Formalise, Streamline  

The Indian edtech sector, which recorded a sudden growth spurt post-Covid, is expected to reach $4 billion by 2025. However, it is still witnessing various changes with the integration of digital learning across education models and the rise of different edtech platforms catering to both the education and corporate spaces.  

The upcoming Union Budget should therefore focus on strengthening infrastructure and introducing policy reforms to the sector. For instance, the government could consider furthering policies and regulations that will aid in streamlining operations and formalising the edtech sector.  

Krishna Kumar, founder and CEO of Simplilearn, suggested that the administration also consider introducing incentives to those edtech companies that comply with the guidelines proposed by the government. This could be extended to those who bring in self-regulatory policies to make their services more transparent to their stakeholders.  

"In the upcoming Union Budget, it would be ideal if the government could consider providing more platforms for start-ups to access capital, offer more tax incentives to attract investor interest, and encourage public-private partnership models with start-up companies at national and state levels to facilitate access to financial and economic support," Kumar added. 

Krishna Kumar, founder and CEO of Simplilearn
Krishna Kumar, founder and CEO of Simplilearn

Krishna agreed that reforms are required in the online learning space and that the government will have to make changes from its end. "Apart from the budget, we also expect the government to frame a policy structure that could encourage schools to expand their online learning efforts by enabling them with more education technology. To nurture new ideas and technologies, there is a need to bring reforms in the online learning space that will truly be the catalyst for further innovation and growth of the sector," he said.  

Seeking Support 

Indian edtech firms have an excellent opportunity to take their learning modules and pedagogy to learners across the globe. Therefore, allocating funds to digital learning, teacher training, and research infrastructure development will give the sector a massive fillip.  

Moreover, looking at the increasing cost of education in the country, long-term tax exemption, lowering GST on education services and continued funding support will help the edtech firms. Vivek Sunder, CEO of Cuemath, recommended offering them a financial cushion, investing in phygital learning formats and allowing them time to rebound and attain profitability. 

Vivek Sunder, CEO, Cuemath
Vivek Sunder, chief executive officer of Cuemath

He added that the true impact of the pandemic and lockdowns on student learning outcomes is only now coming to light. “Children have suffered, especially in STEM (Science, technology, engineering, and mathematics) subjects, which are considered traditionally hard to learn. They need to make up for lost time and improve their learning levels. While schools will do their best to cope, the role of edtech in providing booster doses to kids to get to level is important,” he said. 

Talking about giving impetus to student learning and teacher training, Sunder said, "The government could also consider what many countries around the world have done - either directly or via schools, to provide funds for remedial coaching and tutoring to help bring learners up to speed. This can go a long way in ensuring that the sector can attract and retain quality talent and create more jobs." 

Lowering GST Rates 

Currently, commercial educational services like online courses and skill-based offline solutions attract an 18 per cent GST rate, while books are exempt from the tax. However, with growing digitisation, where a growing tranche of students and professionals are opting for online courses for education and upskilling, there is a need to rationalise the GST Act. 

Sumeet Mehta, co-founder and CEO of LEAD, explained, "GST exemption on the supply of goods (including TVs/tablets for digital education, currently at 28 per cent GST) and services (for teaching and learning applications and content, currently at 18 per cent GST) to educational institutions and intermediaries can reduce the overall cost that is currently passed on to schools and parents. This will make education goods and services more affordable and foster the implementation of NEP (National Education Policy, 2020) across the country." 

Additionally, GST exemption on printing of school textbooks will make these books more affordable for low-income parents in tier one and two cities. For the same reason, printing and service of assessments/examination papers that are a part of school curricula should also be exempted from GST. Such measures will make it easier for India to upgrade its existing education model according to the requirements of an increasingly digitised society. 

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