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Budget 2023 | Edtech startups seek GST cuts, subsidies for students

Budget 2023 | Edtech startups seek GST cuts, subsidies for students

Budget 2023 | Edtech startups seek GST cuts, subsidies for students
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By Nishtha Pandey  Jan 30, 2023 2:13:41 PM IST (Updated)

Post-pandemic, the edtech sector is in a tough spot, with online education on the decline. CNBC TV18.com spoke to a number of startup founders and education experts to get a rundown of the sector's expectations from Budget 2023. Not surprisingly, most were for lower taxes and a stress on research and subsidised upskilling to build up a robust digital ecosystem.

The Indian edtech sector has been on a rollercoaster recently. The industry boomed in 2020, with the pandemic forcing the shift to online education. It wasn’t too bad in 2021. But come 2022 — while in the first half, edtech companies still benefitted from the pandemic aftermath, the second half got rougher.

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As the countdown to Budget 2023 begins, here is a roundup of the edtech sector’s expectations from FM Nirmala Sitharaman:


GST exemptions and digital education

The edtech industry needs government support in the form of subsidised schemes and incentives for improving online initiatives, Abhishek Mishra, Chief Strategy Officer, PW (Physics Wallah) told CNBC-TV18.com.

As per Mishra, the key announcements should include a reduction in GST on education services to democratise education and increase reach among students and initiatives for upskilling and reskilling of students

“With the boom in digitisation investments in new-age tech, skills like AI and coding and including them in schools' and universities' curricula is also expected. Further announcements on an accessible collaboration of the government with edtech companies to improve digitisation and enhance learning outcomes in the education sector,” added Mishra.

In Budget 2022, Union Finance minister Nirmala Sitharaman announced plans to launch a digital university, to be built on a hub and spoke model, to provide education in different Indian languages and formats promoting the edtech sector. This year too, industry leaders expect Budget 2023 to make announcements in facilitating a digital ecosystem.

“Technologies like artificial intelligence (AI), machine learning (ML), internet of things (IoT), cybersecurity, data science and cloud-based technologies are rapidly growing. Their adoption by critical industries such as financial services, telecommunications, healthcare, manufacturing, e-commerce etc. is driving demand for talent skilled in relevant technologies. Hence, it is the need of the hour to strengthen the skilling infrastructure to keep up with the labour market,” said Subramanyam Reddy, Founder and CEO – KnowledgeHut upGrad.

With the upcoming Budget, industry players are looking for the government's commitment to developing a stronger digital education ecosystem that facilitates learning and accelerates the implementation of the New Education Policy (NEP) 2020.

“One thing that we expect from this year’s Union Budget is more government resources and support for edtech initiatives. 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,” said Vamsi Krishna, CEO & Co-Founder, Vedantu.

Further  Divya Gokulnath, Co-Founder, BYJU'S told CNBC-TV18.com that Union Budget 2023 is expected to further the cause of holistic education.
"The previous budget set aside a record Rs 1-trillion-plus for expenditure on education, and we hope for a continued outlay in this year's budget as well. The setting up of the National Digital University, as envisioned under NEP 2020, is a pathbreaking event that can potentially enable our youth to skill, upskill and reskill without the constraints of space and time. Along with steps to increase employment, capacity utilisation, and social infrastructure, measures to lower the cost of capital, power, and logistics would be most welcome." she added.

Focus on incentives and subsidies

The Reserve Bank of India (RBI) reported that banks' education loans grew by 12 percent in the 12 months ended September 30, 2022. The outstanding education loans of Indian banks stood at Rs 89,537 crore on September 23, 2022, up from Rs 79,917 crore in the corresponding period a year ago. As per industry leaders, more students could be encouraged to take up courses by reducing and subsidising interest rates on loans.

“Providing subsidies to students who wish to make investments in either procuring devices for educational purposes such as laptops, smartphones, and tablets are also an expectation from the 2023-24 Budget. This will enable many learners to upskill and get access to high-quality education at a lower cost,” said Neeti Sharma, Co-Founder and President, TeamLease Edtech.

Mayank Verma, Co-Founder, Leadup Universe, pointed out that the Budget 2023 allocation should look at subsidising the use of tools and technologies to help digital penetration for advanced learning solutions in 2023.

Learning, upskilling

In 2022, with things normalising, the world opening again, prolonged funding winter, skyrocketing layoffs, and many growing companies in the sector shutting shop, edtech brands have suffered to sustain. As per data from Bengaluru-based data provider Tracxn, funding in the edtech sector declined to $2.43 billion in 2022, with just 159 deals as compared to 319 deals in 2021 and 222 in 2020.

Edtech experts are expecting announcements for allocating funds to areas of digital learning, teacher training, and the development of research infrastructure in Budget 2023.

“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 by — a) offering them a financial cushion; b) exploring and investing in phygital learning formats and improving the experience; and c) allowing them time to rebound and attain profitability,” said Vivek Sunder, CEO, Cuemath.

Further, as per K.A. Alagarsamy, Director, Consortium for Technical Education (CTE), the upcoming Union Budget 2023 is expected to boost funding for skill development and technical education, particularly for semi-employed youth.

Experts suggest that the government can put forward announcements about providing government subsidies on upskilling. “The government can also adapt measures taken by the German and Singapore governments. For instance, citizens in Singapore receive several government subsidies for acquiring skills in key areas like finance and technology.

“These can go up to 90 percent of the course fee. The government must start looking at technology skills as crucial for overall economic growth. Measures like these will not only encourage more employment for the youth but also contribute to the local and national economy,” suggested Reddy.

Additionally, 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, added Sunder.

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