NITI Aayog proposes tax exemption to boost state universities R&D

Concerns include lack of an incentive system for faculties to pursue research, the dominance of R&D from central universities rather than private and state institutions, and funding constraints

The central government think tank NITI Aayog has proposed exempting state universities and institutes from goods and services tax (GST) and income-tax to bolster their research and development (R&D) outcomes.

“State universities often operate on limited budgets allocated by state governments. Exempting them from GST ensures that essential goods and services they procure for academic and research purposes are not subjected to additional tax burdens. This financial relief allows universities to allocate resources more efficiently to core activities like teaching, research, and infrastructure development,” the Aayog said in a report titled ‘Improving the Culture of R&D in State Universities and Institutes’.

The report underscores current concerns regarding India’s R&D ecosystem, including the lack of an incentive system for faculties to pursue research, the dominance of R&D from central universities rather than private and state institutions, and funding constraints, among others.

The Aayog called for universities and governments to explore financial support mechanisms to compensate for potential revenue losses due to tax exemptions.

“This may involve the creation of special funds or grants dedicated to supporting state universities in their academic and research endeavours. Introduce incentive structures that reward state universities for their contributions to research, innovation, and academic excellence. This could include additional grants, recognition, or other benefits for universities that actively engage in high-quality R&D activities,” the Aayog said.

Regarding intellectual property rights such as patents and commercialisation or transfer of technologies, the think tank noted that state universities are lagging behind central universities, which demonstrate better performance, while private universities lead.

Despite witnessing annual increases in R&D expenditure, India’s gross domestic expenditure on R&D (GERD) as a percentage of gross domestic product remains around 0.7 per cent, according to Aayog data.

A critical factor contributing to this shortfall is the sectoral composition of GERD, showing that the government is the primary contributor to R&D activities in India.

To bridge this gap and achieve the targeted GERD, there is a critical need to increase private sector investments in R&D, according to the Aayog.

“To attract talent to India or bring back Indian talent from other countries, specific issues related to retaining talent, such as ease of conducting research, reduction of bureaucratic recruitment processes, competitive salaries and incentives, along with actions to ease restrictions for foreign scientists working and teaching in India, must be addressed,” the report said.