Budget 2021: Edtech startups seek lower tax burden, incentives to boost online learning

Edtech startups want tax sops and a range of other reform measures, including easing the compliance burden, to grow the online learning sector
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The Indian government must simplify the tax regime, ease compliance burden for edtech companies, and encourage new-age lenders to capitalise on the online learning opportunities that have arisen after the COVID-19 pandemic, education-focused entrepreneurs and financiers said.

The government should also look at offering incentives to students, teachers and employers to accelerate the growth of online learning, the entrepreneurs and financiers said at a panel discussion with YourStory highlighting their expectations from Budget 2021.

Watch the YourStory Budget 2021 Roundtable on edtech sector expectations here:

The budget, to be presented by Finance Minister Nirmala Sitharaman on February 1, is widely expected to boost government spending to help revive the pandemic-hit economy that is projected to contract 7.5-8 percent in the year through March 2021. While the pandemic and stay-at-home curbs crippled many sectors of the economy, the ed-tech sector benefited as demand for online learning soared while colleges and universities stayed shut.

Kickstarting the discussion, YourStory Founder Shradha Sharma said the total amount of funding in the edtech sector more than doubled in 2020 to around $2.2 billion. But the government still needs to support the sector to ensure students receive quality education, she said.

Krishna Kumar, founder of edtech startup Simplilearn, said the government must lower the Goods and Services Tax (GST) on online programmes from the current 18 percent and ensure parity with offline courses, which don’t attract any GST.

“We want more people to become highly skilled. We want high-end jobs, not low-end work like data entry... so we shouldn’t discourage people by charging 18 percent GST,” he said.

Moreover, India doesn’t have enough colleges or universities and the only way to expand access to education and its quality is to let people learn online, he said.

Testbook.com co-founder Ashutosh Kumar and UpGrad’s Mayank Kumar agreed. 

“Many of our customers come from smaller towns where even Rs 1,000 is a big amount. An 18 percent GST is very high,” said Ashutosh. “Also, the cost of creating an online course is far higher than publishing a book,” he added.

Simplilearn’s Krishna Kumar also suggested that the government should allow individuals to deduct expenses incurred on an online learning programme from their taxable income, similar to the tax rebate offered on health insurance. Varun Chopra, co-founder and CEO of education-focused lender Eduvanz Financing, concurred with him.

Chopra added that the cost of funds for education-focused fintech startups remains high despite the multiple rate cuts by the central bank over the past year. The government should tailor-make incentives for education-focussed lenders, he said.

For instance, there is a national credit guarantee programme but it covers loans for courses only up to Rs 1.5 lakh. Most high-end courses cost more than this limit. “So, it gets difficult to provide loans,” he said.

The Testbook and UpGrad co-founders stressed on another key area—training the teachers.

“Even good-quality teachers with 10-15 years of experience in the offline world fall behind when it comes to modern teaching methodologies,” said Ashutosh.

Mayank added that 90-95 percent of teachers were not trained to teach online when the pandemic began. “There has to be a revamp of the B.Ed system and online teaching should be part of that,” he said.

Mayank also suggested how offline and online players can work together. A college or a university can tie up with upGrad or Simplilearn to offer online courses, team up with Testbook for entrance exams, and with Eduvanz for financing, he said. “But regulations need greater clarity.”

For YourStory's multimedia coverage of Budget 2021, visit YourStory's Budget 2021 page or budget.yourstory.com