Budget 2024: Struggling Edtech Industry Appeals for GST Relief and Tax Incentives.hinterlands and onboard more learners on the edtech bandwagon.

The Indian edtech startup ecosystem has experienced a significant downturn over the past two years. From being highly favored by venture capitalists in 2021, the sector is now grappling with a severe funding crunch. The capital inflow into the edtech sector has plummeted from $4.7 billion in 2021 to $283 million in 2023. Issues such as the lack of a clear path to profitability and substantial cash burn continue to haunt the ecosystem.

As the Union Budget 2024 approaches, edtech startups are looking to Finance Minister Nirmala Sitharaman for potential measures to revive the sector. With general elections later in the year, the finance minister is set to present an interim budget on February 1, focusing primarily on government expenditure without major announcements.

Despite the limited scope for major changes, Indian edtech startups are hopeful for incentives and rebates that could positively impact the sector. The primary demand from the budget is a reduction in the Goods and Services Tax (GST) on edtech offerings. Currently, educational services attract an 18% GST, while associated hardware products face a 28% rate.

Key figures in the edtech sector, including Prateek Maheshwari from Physics Wallah and Anita Rehman from Celesta Capital, are urging the government to lower the GST rate to 5%. They argue that this move would alleviate financial burdens on parents, promote affordability, and enhance accessibility to educational products and services.

Edtech unicorns like BYJU’S, Unacademy, upGrad, Vedantu, and Classplus, represented by the India Edtech Consortium (IEC), are collectively advocating for these changes. LEAD Group's CEO, Sumeet Mehta, suggests that GST relief on school-centered solutions could foster innovation and improve access to affordable and high-quality education.

Beyond the GST reduction, edtech startups are calling for a strategic GST policy and additional incentives in the budget to stimulate growth. Stakeholders are also optimistic about short-term tax breaks and grants to boost confidence in the ecosystem. Tarun Saini, CEO of edtech startup Vidyakul, emphasizes the importance of user-centric schemes and effective implementation for the desired impact.

Milan Sharma, founder of 35 North Ventures, proposes special tax exemptions for startups in areas with low literacy rates, forming 'Special Education Zones.' Industry stakeholders believe that a higher budgetary allocation for the education sector, in line with the National Education Policy 2020's target of 6% of GDP, would benefit edtech through experiential learning, digitization, and infrastructure enhancement.

Edtech startups are also seeking favorable policies in the upcoming budget to create an environment conducive to innovation and research and development (R&D). Anil Nagar, CEO of Adda247, emphasizes the need for a supportive ecosystem that focuses on capacity building and technology across the entire education spectrum.

In the face of sectoral challenges, edtech startups are hoping for collaboration with the government, anticipating more policies that can positively impact their services. Many stakeholders believe that higher budgetary allocations for government accelerator programs and increased collaboration will foster growth and expansion in the edtech sector.