Edtechs' Budget wishlist: Lower taxes, higher funding, greater incentives

Struggling with drying investment, dealing with cost cutting, the sector hopes Budget eases the pain

The education technology (edtech) sector, once a darling of investors, has seen a downturn in form. At the peak of the pandemic, edtechs took over as a key source of education, after playing second fiddle to offline classes for a long time.

With the pandemic subsiding in the latter part of 2021 and schools reopening, the sector saw its revenues take a hit. And 2022 added to its woes. A number of edtech start-ups such as Udayy, SuperLearn and Lido shut shop, and many others resorted to cost-cutting measures, including firing their employees.

So, the sector is watching the forthcoming Budget keenly and pinning hopes on there being something in it for it. One major area of concern is taxes. Edtech firms believe that the high taxes (18 per cent Goods and Services Tax, or GST) deter students and professionals from investing in education.

“We expect the government to consider establishing a robust framework in the Budget to lower the cost of higher education, thereby granting applicants with higher rebates and deductions in tax calculations,” says Mayank Kumar, co-founder and managing director, upGrad. “The government can also introduce an additional tax provision to accelerate the acceptance of online education and upskilling. Such incentives will help India maintain its status as the ‘Talent Pool’ of the world.”

Some players have also sought an increase in funding for the sector in the upcoming Budget.

“While a number of initiatives were introduced in the Budget last year, issues such as the funding winter, skyrocketing layoffs, and a number of edtech firms shutting shop have posed new challenges for the industry,” says Vivek Sunder, CEO of Cuemath. “Looking at the increasing cost of education in the country, long-term tax exemptions, lowering GST on education and continued funding support will help edtech firms.”

Vamsi Krishna, CEO and co-founder, Vedantu, echoes that sentiment when he says one expectation from this year’s Budget is resources and support for edtech initiatives. “Investment in education technology is imperative for the development of our learning ecosystem,” he says. “We also expect the government to frame a policy structure that may encourage schools to expand their online learning efforts.”

A number of these players are batting for the upskilling of professionals to ensure the industry stays relevant and changes with time. “Education technology offers millions of working professionals an opportunity to upskill and reskill,” says Akshay Marwah, co-founder of Noida-headquartered AAFT Online. “Relief in taxes can make it affordable for more people. Incentives for on-the-job skilling may inspire more employers to promote it.” Layoffs, he adds, have become a reality, and many roles are becoming obsolete by the day. “In such an environment, workers and professionals must reinvest their skills through government policies,” Marwah says.

Kumar also called for incentivising Esops for lower tax burden. According to him, taxation of Esops has proven to be a big deterrent in the industry. He calls for an approach to treat Esops as part of public-market investments.

“Incentivising Esops with a simpler and appropriate tax structure similar to shares will make it an attractive wealth creation opportunity and will also help start-ups in retaining the talent pool,” he says.

Abhishek Mishra, chief strategy officer, PhysicsWallah, is of the view that the edtech industry needs support in the form of subsidised schemes and incentives for improving online initiatives. “The focus should be on upskilling and reskilling so that students are equipped with skills from an early age,” he says. He is for accessible collaboration of the government with edtech companies to improve digitisation and enhance learning.    

In Budget 2022, Finance Minister Nirmala Sitharaman had highlighted the government’s focus on digital learning with its decision to expand the ‘One class, one TV channel’ scheme, and set up a digital university.

Among other plans, the National Education Policy (NEP), introduced by the government pre-pandemic, also aimed to advocate tech integration in school education.

Byju’s, which witnessed a tumultuous year in 2022, believes that extending these ideas further would spur the sector’s growth.

“The world’s growth prospects have been clouded by difficult macroeconomic and geopolitical factors,” says Byju’s Co-founder Divya Gokulnath. “The Budget should advance the Digital India mandate, offer GST reduction on educational products and services, and further the cause of holistic education.”

Extending the ideas behind PM e-Vidya and One Nation, One Classroom into a wider range of developmental economics will be welcomed, as well as the fast-tracking of the NEP, she says. “Investments in the development of human capital and skilling will also give momentum to the sector.”

What they want

• Additional tax provision to accelerate the acceptance of online education and upskilling
• Long-term tax exemptions, lower GST
• Policy structure to encourage schools for enhancing online learning efforts
• ESOPs as part of public-market investments