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Edtech Startups Demand Lower GST and Greater Government Effort to Bridge Digital Divide

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Edtech Startups Demand Lower GST and Greater Government Effort to Bridge Digital Divide

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India’s edtech startups have been among the top benefactors of the pandemic as online learning has become mainstream with students and professionals logging on to take on curricula

As the pandemic-driven digital shift has transformed smartphones, tablets and laptop screens into classrooms, e-learning startups have pocketed $4 billion in funding in 2021, twice the funds obtained in 2020.

In fact, four of the six edtech unicorns reached their $1 billion valuation in the last 12 months – a testament to the kind of boom that India’s edtech sector has witnessed. A Praxis-IVCA report pegged the Indian edtech market at $117 billion in 2020. It is expected to more than double to $225 billion by FY25.

Rapid growth comes with controversy. The allegations range from overselling to misleading advertisements and confusing payment structures.

Flags have been raised about how this hyper-competitive industry is going about growing its business. In a bid to implement self-regulation, leading edtech companies have now formed the Indian EdTech Consortium (IEC), which will work under a common code of conduct and establish a two-tier grievance mechanism.

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This shift to self-regulation also follows growing concerns expressed by the government. The Department of Education even issued a notice, warning parents and students of potential violations by edtech companies.

While India’s ‘Next Half Billion’ wants better learning and development opportunities, edtech startups say they can play a vital role in bridging the digital divide with government support.

Here is what the Indian IT sector expects from this Union budget:

Rachit Agrawal, Co-Founder and Director, AdmitKard: In this budget, we expect to see the Indian economy focus on building the capacity of school infrastructure to enable the hybrid model of education that has become essential in the recurring pandemic scenario. Also, preschool needs to be more tech-focused and we expect that to work in favor of the EdTech community.

Anil Nagar, Founder and CEO, Adda247: The government should reduce the GST while focusing on building a strong digital infrastructure to improve the quality and experience of online education for students in cities as well as remote areas. The government should also forge alliances with edtech companies to accelerate learning outcomes using advanced technologies in the education ecosystem.

Vaibhav Singh, Co-Founder, Leap Fellow: The 2022 budget is expected to focus more on the edtech sector as a whole, with significant investments to improve access to robust and improved digital infrastructure. The GST for educational services should be reduced to 5% from the current 18%, to increase accessibility and feasibility for students from middle and lower class families. With greater internet penetration, the upcoming budget is expected to announce various initiatives to accelerate digital innovation in the edtech sector.

Ruchir Arora, Co-Founder and CEO, CollegeDekho: Quality education is a key driver for a country’s economy and we want the next budget to focus on improving the gross enrollment rate (GER). With a current GER of 27.1%, considerable effort is needed to ensure that we achieve the target of 50% GER by 2030 as outlined in the National Education Policy, 2020.

Karanvir Singh, Pariksha: We would really like the government to think about the tax structure of ESOPs, so that they are only taxed at the time of sale and not at the time of exercise, as is currently the case. Additionally, a centralized business tax system modeled on the GST will further assist and increase the ease of doing business for startups operating in multiple states.

Hemant Sahal, CollPoll: Significantly reduce, if not completely remove, the GST on educational services, including the technology solutions that have become the backbone of our institutions during the pandemic. This has been a request for a long time and I think the time has come for the government to act on it. Another key change I look forward to in Budget 2022 is a clear plan to bridge the digital divide in public schools and higher education institutions.

Sahil Miglani, Geekster: The pandemic has changed the way learning happens and accelerated the adoption of online education by 5-10 years. Delivering quality education to every city and town in the country is now possible, provided the digital infrastructure is improved. We expect the government to review the high GST on education-related services and the higher overall budget allocation to this sector.

Himanshu Tyagi, CEO and Founder, Digikull: In India, any service related to skills development must fall under the lowest tax bracket. The government should review the 18% GST on skills, which is very demotivating for students who want to acquire skills-related training. Even education-related loans should be given at lower interest rates.

Edtech Startups Demand Lower GST and Greater Government Effort to Bridge Digital Divide

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