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Covid shifted the way we shop and relax. E-commerce and streaming services were already a growing element of the economy, but social distancing accelerated the trend. In response, lawmakers around the world are updating tax policies to meet the new digital economic reality.

Of course, the digital economy encompasses more than shopping and entertainment. It’s not just the world of work that pivoted to online, schools and universities had to adjust, too.

For education entrepreneurs, that meant opportunities as well as challenges. As India’s CNBC TV18 reports, e-learning startups doubled their funding in 2021 compared to the previous year. 

When Learners are Consumers

As the report makes clear, the outcomes are mixed. The services are indisputably useful in many cases. But there have also been claims of “misselling to misleading advertisements and confusing payment structures.”

India’s leading EdTech businesses are now on a push to self-regulate, in anticipation of potential government action. For policymakers in India, there is a clear need for a reasonable, transparent framework for online education.

Tax and Access to Education

More broadly, the rise of EdTech raises questions about how technology should be taxed when it is used for educational purposes.

CNBC TV18 quotes EdTech entrepreneurs saying that GST on education should be lowered or even scrapped. For example, Hemant Sahal of digital learning business CollPoll says the government should “reduce GST substantially, if not completely waived off, on educational services including technology solutions which became the backbone of our institutions during the pandemic.”

Globally, digital services VAT/GST is an increasingly important source of revenue. At the same time, lowering VAT on essential services can play an important social function. 

Digital VAT for a Globalized Economy

As a policy tool, digital services VAT has multiple functions. Notably, regulators want to create a more level playing field for local and domestic entrepreneurs.

Businesses that operate in the EdTech space and want to take their operations to more customers around the world will need to pay very close attention to developments in global digital taxation.

Supplying services to a global audience is especially complicated as the definitions of an electronic service, and the policies around taxing essential services like education, differ significantly in each country.