A goods and services tax (GST) levy on services is being applied on workers enrolling for the government's skill development programme, discouraging them and industries alike, said experts on Thursday.
The 18 per cent GST is applicable on enrolment of workers sponsored by their employers or individuals aspiring for jobs in industries.
The Finance Ministry often, sponsors the training fees, but many companies use their corporate social responsibility (CSR) funds to improve their workers' skills. Companies fill the 18 per cent GST pinch then.
“Students pay for themselves or by sponsors find 18 per cent GST on training fees back-breaking leading to postponement or cancellation of vocational training. The training provider imparts basic vocational training to under-qualified and unskilled youth to make them employable," said G A Soman, principal of Don Bosco Training Academy in Mumbai and former chairman of Indian Institute of Welding (IIW).
Candidates enrolling for professional training have to pay huge sums as fees. A basic steel welding courses cost about Rs 45,000 per student. Training courses in textile and diamond processing in the organised sector and plumbing in the unorganised sector charge between Rs 20,000 and Rs 25,000. Most candidates are poor and can hardly arrange the training fees with high tax.
IIW has urged the government to exempt skill development courses from GST. Meanwhile, industries like diamond processing are also facing huge GST burden on industries especially when the absorption rate slows down.
“The industry is paying 18 per cent of GST on all processed diamond certified by a certifying agency. When these certified diamonds are exported, the exporter gets an input credit which stands lower than the GST paid on certification as buyers do not reimburse taxes. This has resulted into GST accumulation and, therefore, blockage of working capital of diamond processors, we have proposed the government to reduce the GST on diamond certification to 5 per cent,” said Colin Shah, Vice Chairman, Gems and Jewellery Export Promotion Council (GJEPC).
On training and skill development, expenses incurred by diamond processors are subject for reimbursement. The skill development across the industry is run and monitored by the National Skill Development Council (NSDC) which offers complete waiver of GST in vocational courses.
Meanwhile, the ongoing economic slowdown in India has pushed a speed breaker on skill development and up-skill of trained manpower. Since its incorporation in 2014, the Textile Sector Skill Council (TSC) has enrolled 147,678 trainees under various programmes launched and certified 135,391 candidates to make them a trained professional.
“The aim of the government’s Skill India mission was to create professionals for long term. The slow rate of absorption of skilled workers is a temporary phenomenon which would overcome in six months,” said Rahul Mehta, president of Clothing Manufacturers Association of India (CMAI).