Budget 2024 wishlist: Edtech sector seeks tax breaks, govt schemes, and funds to fuel growth

India’s edtech sector has been in a state of turbulence for some time now, marked by significant layoffs, a liquidity crisis, and funding crunch.

Edtech firms are fervently hoping that Finance Minister Nirmala Sitharaman’s Interim Budget for 2024 will offer some relief. They anticipate various measures such as tax exemptions, reduced GST rates, improved digital infrastructure, and increased fund allocation to fuel the sector’s growth.

The education sector received a significant boost in Budget 2023, with a total allocation of Rs 1,12,899 crore—an 8% increase from the previous year’s outlay. Of this, Rs 68,804 crore was designated for school education and literacy, while Rs 44,094 crore was earmarked for higher education.

Revamping tax structure

Sumeet Mehta, Co-founder and CEO of LEAD, a school edtech unicorn, says that, for India to achieve developed nation status by 2047, it is imperative to transform the school and college systems.

The New Education Policy (NEP) 2020 advocates educational institutes to shift from traditional textbook learning and embrace multimodal education. The NEP, which replaced the National Policy on Education (NPE), 1986, was approved to make way for large-scale, transformational reforms in both school and higher education.

However, GST relief is key for this transformation to happen, making education affordable and accessible, points out Mehta.

“All technology and learning hardware to schools are currently taxed at 18% or 28%. GST relief on school solutions will make goods and services for education more affordable and will help foster educational innovation and transformation,” he explains.

Prateek Maheshwari, Co-Chair of India Edtech Consortium, and Co-founder of Physics Wallah, too proposes reducing the GST slab on educational products and services from 18% to 5%.

“Given the evolving world and our shifting approach to education, ensuring affordable and quality education at scale needs more collaboration for public and private sectors. Reducing the GST on educational services would remove financial strain on parents, promoting affordability,” he elaborates.

A few edtech players also believe the government must look at how employee stock ownership plans (ESOPs) are approached, as part of public market investments.

“Incentivising ESOPs with simpler and appropriate tax structures like shares would make it an attractive wealth creation opportunity and would also help startups attract and retain their talent,” remarks Mayank Kumar, Co-founder and MD of upGrad, an upskilling edtech unicorn.

Affordability and accessibility

A significant part of the country’s population faces economic barriers in accessing learning opportunities, prompting industry leaders to press for measures to enhance the affordability and accessibility of educational services.

“We urge for a substantial increase in scholarships and financial assistance for students. Making education more affordable for underprivileged students should be a priority, ensuring that no aspiring mind is hindered by financial constraints,” says Ashutosh Burnwal, Founder and CEO of Buddy4Study, an online platform for scholarship discovery.

Manisha Zaveri, Joint Managing Director of Career Mosaic, an education consulting agency, contends that it is crucial to implement measures that enhance the accessibility and affordability of international education. Measures could involve targeted scholarship schemes for students from Tier II and Tier III cities, tax benefits for families supporting overseas education, and streamlined visa processes, he suggests.

Skill development

In response to the heightened demand for skills in a competitive job market, edtech players advocate for increased focus, higher investment, and tax breaks on investments in skill development.

There is a global skills shortage in emerging sectors such as artificial intelligence, semiconductors, biotech, and informatics—an opportunity for India to seize.

India’s abundant resources, favourable demographics, and strong higher education position it as a key global talent source in these industries, says Ashish Wadhwani, Co-founder and Managing Partner of IvyCap Ventures, a Mumbai-based venture capital firm.

He explains that the focus should be on deepening existing linkages, aligning higher education capacity with industry demands, and facilitating specialised courses with global partnerships in emerging areas.

“Skilling and upskilling are like booster shots one needs to drive better success and must not be skipped. However, the higher tax burden/slab has remained the biggest deterrent,” says upGrad’s Kumar, adding that lowering tax on such services and providing subsidies for students in procuring digital educational devices would be steps in the right direction.

Akshay Munjal, Founder and CEO of Hero Vired, the Hero Group’s edtech firm for professionals, highlights the need for recognition of online degrees and says expediting adoption of technology is crucial to the skilling industry.

Sumit Kumar, Chief Strategy Officer at TeamLease Degree Apprenticeship, believes there is a need for an integrated approach for formalisation and scaling of the skilling system; and channelising skilled workforce to formal employment.

“Our various operational schemes like NAPS (National Apprenticeship Promotion Scheme), under ‘Skill India’ movement, PLI under ‘Make in India’ movement and Pradhan Mantri Rojgar Protsahan Yojana should be interlinked,” Kumar adds.

“Focusing on collectively enhancing youth skills to increase employability and reduce skilling gaps is imperative for the Indian economy’s growth,” says PhysicsWallah’s Maheshwari.

Apart from upskilling learners, it is also important to prioritise the professional development of teachers, particularly in digital-first teaching methodologies.

Sujatha Kshirsagar, President of Career Launcher, an education services firm, feels this will help the country stay competitive in the academic landscape and improve overall education quality.

Policies and funds

Players in the education sector believe that the interim budget should acknowledge the imperative to move closer to the NEP recommendation of allocating 6% of GDP for education. This calls for government initiatives and funds that open the doors for students, irrespective of their socio-economic background.

“Many graduates are struggling with placements; earmarking funds for new initiatives that help reinvent the education sector in the 21st century through the integration of learning and working will yield a significant return on investment for learners and employers,” says Dinesh Kumar Poobalan, CEO and CTO of Greatify, an educational management platform.

Anil Nagar, Founder and CEO of Adda247, a vernacular learning platform, hopes to see government-backed accelerator programmes and innovation hubs that would encourage R&D in the sector.

In Budget 2023, the finance minister unveiled various schemes for the education sector—including Pradhan Mantri Kaushal Vikas Yojana 4.0 to provide skills in new-age courses to youth, National Digital Library for children and adolescents, and District Institutes of Education and Training for teachers.

“While last year’s Budget rightfully emphasised green growth and sustainability, this year presents a unique opportunity to invest in our most valuable asset—human capital,” notes Dr Jitin Chadha, Founder and CEO of Indian Institute of Art and Design.

(Cover image and infographic designed by Sharath Ravishankar)