Uncovering Alleged Tax Evasion in India’s Commercial Coaching Centers

Introduction

The Directorate General of Goods and Services Tax Intelligence (DGGI) has launched a sweeping investigation into suspected tax evasion by leading commercial coaching centers across India. Reports suggest that these entities may have evaded taxes totaling an astonishing ₹850 crore during the fiscal years of 2020-21 and 2021-22.

Initiation of Probe

In January 2023, the DGGI initiated a comprehensive inquiry aimed at uncovering any potential misrepresentation of student enrollment figures and failure to remit owed taxes to the government.

Scope of Investigation

The investigation spans numerous large and mid-sized coaching centers nationwide, with approximately 145 establishments currently under scrutiny. These centers represent a diverse range of academic coaching, including those preparing students for medical and engineering entrance exams, as well as those focusing on test preparation for exams like IELTS and GRE. Spanning major cities like Delhi, Mumbai, Kota, Kolkata, Chandigarh, Chennai, Coimbatore, and various tier-2 cities, these coaching centers are integral to the educational landscape.

Types of Coaching Centers

The coaching centers under investigation cater to a broad spectrum of students pursuing various academic and professional goals. From intensive medical and engineering exam preparation to language proficiency exams like IELTS and GRE, these centers play a crucial role in shaping students’ futures.

Arrests and Confidentiality

While the investigation has led to certain arrests, the identities of the implicated coaching centers remain undisclosed as the inquiry unfolds.

Tax Evasion Practices

Initial findings indicate potential tax evasion practices employed by these coaching centers. Allegations include the collection of Goods and Services Tax (GST) at a standard rate of 18% on tuition fees from students but failure to remit the collected taxes to the government. Additionally, some coaching centers allegedly filed returns claiming tax exemption for their services despite collecting GST from students. Another concerning practice involves the collection of GST on tuition fees, followed by its subsequent waiver as a discount to students, without accurate record-keeping in filed returns. Such actions are believed to violate provisions outlined in Section 132(1)(d) of the CGST Act, 2017.

Discrepancies in Revenue Reports

Further examination has revealed inconsistencies in the revenue reports submitted by these coaching centers, indicating potential irregularities in their financial practices.

Enforcement Measures

In response to these findings, the DGGI has directed all zonal offices to compile a comprehensive list of coaching centers that have yet to register under the GST, signaling a concerted effort to address potential tax evasion within the sector. This investigation underscores the importance of transparency and compliance with tax regulations within the commercial education sector. As the inquiry progresses, its outcomes are expected to shed light on the extent of tax evasion practices within these coaching centers, potentially leading to stricter enforcement measures and enhanced regulatory oversight.