Will Sending Our Kids To School Become More Expensive With GST?
The biggest wealth one can leave for their children is knowledge – that is why most parents strive to provide their children with the best education possible. Parents are prepared to tighten their belts so that they can afford to send their children to the best school they can afford — some opt for private or international schools. Fees alone at these institutions can be intimidating as it ranges from RM7,000 per year for private schools and from RM80,000 per year for international schools.
Although private education is GST exempted, the GST charges on some education materials, infrastructure and services would still raise the total cost of education. National and national-type schools will equally be affected by cost increase in services acquired that are related to GST such as consultancy, security, computer repairs, maintenance, cleaning services. Public educational institutions are not charged GST on the acquisition of all goods.
What is categorised under GST out of scope and zero-rated supplies?
Educational services provided by all national schools or national type schools and public examination fees are categorised under out of scope supplies. Out of scope means that the educational services offered are not under the GST Act and therefore are not subject to GST. The same applies for the acquisition of goods from suppliers for providing educational purposes, such as multimedia equipment used as a teaching aid.
The following is categorised under 0% GST and therefore no GST is charged unto it:
Services by private educational institutions are exempted from GST. Therefore, the private educational institutions cannot charge GST on the supply of educational services made by them. They also cannot claim any input tax on any acquisitions or purchases made for the provision of the exempted supplies.
What is charged GST?
Though education is stated in the exempt supply list, public, private or international schools can expect to see higher operation course, which can trickle down to the parents.
There is a special GST relief given to the public educational institution for the goods obtained and used in the premise of the school, but this relief is not applicable for services acquired. GST will be charged by the school’s suppliers for any services acquired such as consultancy, security, computer repairs, maintenance and cleaning services.
It will be worse for non-public schools, where all the goods and services supplied to them will be charged GST, if the supplier is a GST registered company. From teaching aids like projectors and laptops, to gardening and cleaning services rendered to the school — all will see a 6% increment.
However, there are certain supplies by private educational institutions which are not exempted. These services are taxable supplies and subject to GST. They will be able to claim input tax on this:
Having these items charged GST, could lead to hike in school fees charged by private institutions. Besides that, GST charged on acquisition of non-curriculum goods (e.g. car) and services (e.g. consultancy, security, computer repairs, maintenance, cleaning services) can indirectly lead to hike in school fees.
How much more will it cost?
Let’s look at an example to see how much more education in a private secondary school* will cost for one child with GST factored in:
**Tuition fee charged by the school is not charged GST if it follows national or approved curriculum system. This is not the same tuition fees charged by tuition classes outside of school.
These numbers are at present value as we haven’t seen whether the schools will increase their tuition fees to compensate for the GST that they cannot claim. So this is the minimum increase in cost.
Your total costs will significantly increase if you have more than one school-going kid, if your kid stays at boarding school or if you send your kids for more non-curricular related classes, causing the cost of your child’s education shooting up.
As education is important and there is no other way around it, parents are bound to send their children to school. The increase in cost would not offset the various benefits their children will reap from them in the long run.
This makes it even more important for parents to plan their finances ahead. It is no longer about just saving for your child’s tertiary education, but also from as young as primary school. It’s time to re-plan your budget to accommodate GST.