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GST on Edu Loan 2025

GST on Education Loan: Understanding Charges and Exemptions in 2025

Written By
Vaishali Pandey
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Reviewed By
Updated On:
Sep 30, 2025
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5 Minutes
mins read
Vaishali Pandey
Updated On:
Sep 30, 2025

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GST (Goods and Services Tax), implemented on 1st July 2017, streamlined India’s taxation system by consolidating multiple state and central taxes into a single framework. While its primary aim was to simplify the tax structure, GST has impacted various sectors, including education financing. For students and parents planning to fund higher education, understanding the nuances of GST on education loans is essential.

By the end of this blog, you will know

  • How GST applies to education loans, including associated costs like processing fees.
  • The distinction between GST on education loans and GST on educational services in India.
  • Practical tips to minimise costs when availing of an education loan.

GST on Education Loan in India: What Charges Are Applicable?

No, GST is not directly applicable to education loans. The principal amount and interest of an education loan are not subject to GST. However, certain associated services attract GST, including:

  • Loan Processing Fees

An 18% GST is levied on the processing fees charged by financial institutions.

  • Administrative Charges

Any additional charges related to the loan also attract GST at the standard 18% rate.

Example:

Suppose you are availing of an education loan with a processing fee of ₹10,000. Here’s how GST impacts this fee:

  • Processing Fee: ₹10,000
  • GST (18%): ₹1,800
  • Total Cost: ₹11,800

While the GST on education loan itself remains GST-free, these additional charges can marginally increase the overall cost of borrowing. To plan your finances effectively, it is crucial to confirm all associated costs with your lender.

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GST on Education Loan vs. GST on Education Services

It’s important to differentiate between GST on education loans and GST on education services, as they are governed by different regulations under the GST framework.

Aspect

GST on Education Loan

GST on Education Services

Applicability

GST is applicable only to associated services like loan processing fees and administrative charges.

GST applies to commercial education services like coaching centres, online courses, and training programs.

GST Rate

18% on associated services.

18% for commercial services; core educational services are exempt.

Exemptions

Principal and interest are exempt from GST.

Core educational services provided by recognised institutions are exempt.

Examples

Processing fees for an education loan.

Online courses, private coaching, vocational training programs.

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GST on Educational Services and Its Relevance to Education Loans

While education loans themselves are exempt from GST (principal and interest), the GST levied on broader educational services can indirectly increase the overall cost of education. This, in turn, can lead to a higher dependency on loans for financing education. Here's a breakdown of GST rates for educational services:

Service Type

GST Rate

Exemption

Pre-school education

Exempt

Yes

Primary and secondary education

Exempt

Yes

Higher education services

18%

No

Private tuition

18%

No

Vocational training

18%

No

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Student’s Concern about GST on Education

On a recent Reddit thread, a student questioned why NPTEL courses—government-backed online learning programs still attract an 18% GST. Their frustration is clear:

“We’re already paying to learn. Why should education, especially government-funded platforms, carry a tax? We don’t even get GST refunds like businesses do.”

This reflects a wider student concern: whether it’s fair to add extra costs to courses meant to promote accessible education.

From a policy perspective, GST applies because these courses are classified under “online educational services.” However, there have been calls to exempt or reduce GST for non-profit and skill-development programs.

What students can do:

  • Look for official exemptions or fee waivers on NPTEL or similar platforms.
  • Explore scholarship-backed alternatives or free versions of the same course modules.
  • Raise the issue with academic institutions or education forums—collective voices often push policy changes.

Pro tip: Always check the course fee breakdown. If GST is included, factor it into your budget upfront instead of being surprised later.

Should Educational Institutions Register for GST?

Whether an educational institution needs to register for GST depends on the nature of its activities and revenue.

When GST Registration Is Not Required?

  • Non-profit institutions: Schools run by charitable trusts, government bodies, or local authorities that provide education from pre-school to higher secondary levels are generally exempt.
  • No taxable services: Institutions that only provide exempt educational services and whose annual turnover is below the GST threshold do not need to register.

When GST Registration Becomes Mandatory?

  • Taxable services: Institutions offering services such as coaching, vocational training, or other taxable courses must register if their annual turnover exceeds the GST limit.
  • Ancillary services: Providing additional services like transport, hostel facilities, or catering usually brings GST obligations, requiring registration.

Tax Benefits on Education Loans in India

Education loans not only help students achieve their academic dreams but also offer significant tax benefits under the education tax in India. The primary advantage comes through Section 80E of the Income Tax Act, which allows borrowers to claim a deduction on the interest paid for education loans.

1. Applicable Deduction

Borrowers can claim a tax deduction on the interest paid on an education loan. The deduction applies to loans taken for higher education, including courses in India and abroad.

2. No Cap on Deduction

There is no upper limit on the amount of interest that can be claimed as a deduction. This allows borrowers to maximise tax savings, particularly for high-value education loans.

3. Eligibility Period

The deduction is available for a maximum of 8 years or until the loan is fully repaid, whichever comes earlier.

4. Who Can Claim

The deduction can be claimed by the borrower, whether it is the student or their parent, provided they are the ones repaying the loan.

How to Minimize Costs When Availing an Education Loan?

Although the principal amount and interest on education loans are GST-free, certain services like processing fees and administrative charges attract an 18% GST. Here are some practical ways to reduce these additional costs:

1. Negotiate Processing Fees

Some lenders may waive or reduce processing fees for specific student profiles, institutions, or courses. A lower processing fee directly reduces the GST levied on it.

2. Choose Government-Backed Loans

Opt for loans provided under government schemes, which often come with lower or no processing fees, thereby minimising GST-related expenses.

3. Compare Loan Offers

Research multiple financial institutions to find lenders offering lower processing fees and other charges. This can help reduce the overall cost, including GST.

4. Institutional Tie-Ups

Some universities and colleges have partnerships with banks offering discounted loan services. These partnerships can help students avoid or minimise additional costs.

5. Understand Fee Breakdown

Always ask for a detailed breakdown of loan-related charges, including GST on services. Transparency helps you plan better and avoid unexpected expenses.

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GST’s Broader Impact on Education

Although education loans themselves are GST-free, the overall rise in GST on supplementary education services affects students and borrowers. Key impacts include:

1. Increased Operational Costs

Higher education institutions face increased costs due to GST on ancillary services, which may lead to higher fees for students.

2. Financial Burden on Borrowers

Students using education loans may encounter an 18% GST on loan-related services such as processing fees and administrative charges.

3. Challenges for Vocational Training

Private training centres and vocational institutes are subject to GST, increasing their fees and making loans necessary for many students.

4. E-Learning Platforms

Online education platforms face compliance and tax costs due to GST, indirectly impacting students availing loans to access these services.

5. Overall Cost Rise

With GST applicable to many supplementary educational services, the overall cost of education increases, pushing more students to depend on loans to bridge the gap.

While the principal and interest of education loans remain GST-free, associated charges like processing fees and administrative costs attract GST, adding to the overall expense. Understanding these nuances is essential for borrowers to plan their finances effectively. By leveraging tax benefits under the education tax in India and carefully comparing loan options, students can minimise costs and focus on achieving their educational aspirations. 

Choose wisely, stay informed, and take a step closer to realising your academic dreams with the right education loan!

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FAQs About GST on Education Loan

How much GST on education loan in India?

GST is not directly applicable to the principal or interest of an education loan in India. However, processing fees and administrative charges attract an 18% GST.

Does GST on education loans increase the overall cost of borrowing?

Yes, while the loan itself is GST-free, the GST on processing fees and other services marginally increases the total cost of borrowing.

How much GST is charged on education loan services in India?

An 18% GST is levied on loan-related services, such as processing fees and administrative charges.

Is GST applicable to government-backed education loans in India?

Yes, GST applies to the processing fees and administrative services of government-backed loans, although some schemes may have lower or no fees.

Are there any exemptions under GST for education loans in India?

The principal and interest of education loans are exempt from GST, but no exemptions exist for associated service charges like processing fees.

How does GST on education in India indirectly affect students relying on loans?

Increased costs for private tuition, vocational training, and other ancillary educational services under GST can push students to depend more on loans to meet their financial needs.

What steps can borrowers take to minimise GST-related costs when availing of an education loan?

Borrowers can negotiate processing fees, compare lenders for lower charges, and opt for government-backed schemes to reduce costs impacted by GST.

Does GST on education loan services impact the tax benefits under Section 80E?

No, GST on education loan services does not affect the tax deduction available on the interest paid under Section 80E of the Income Tax Act.

How is GST on education loan processing fees calculated?

GST on processing fees is calculated at 18%. For example, if the processing fee is ₹10,000, the GST will be ₹1,800, making the total fee ₹11,800.

Is GST applicable to online education platforms or e-learning courses in India?

Yes, most online education platforms and e-learning courses attract an 18% GST, which can indirectly impact students funding their education through loans.

What is the difference between GST on education loans and GST on education services?

GST on education loans applies only to associated services like processing fees, whereas GST on education services covers commercial services like coaching centers and online courses.

Are vocational training programs in India subject to GST?

Yes, vocational training programs are subject to 18% GST unless provided by institutions exempted under GST laws.

How does the education tax in India impact education loans?

Education tax benefits under Section 80E reduce the burden of repaying loans, but GST on services like processing fees adds to upfront costs.

What is the impact of GST on private coaching and its relation to education loans?

Private coaching attracts an 18% GST, increasing overall education costs. Students may rely on education loans to cover these expenses.

Why is GST charged on education loan services when the loan itself is tax-free?

GST is charged on education loan services because these are classified as financial services provided by banks or NBFCs, which fall under taxable categories.

Are there any concessions on GST for students with specific profiles or needs?

While there are no direct GST concessions for students, certain lenders may waive or reduce processing fees for specific student profiles, indirectly reducing GST costs.

How does GST on education in India influence higher education affordability?

GST on ancillary services, like private coaching and higher education-related costs, indirectly increases the overall cost of education, making loans more essential for affordability.

Can borrowers claim GST paid on education loan services as a tax deduction?

No, GST paid on education loan services cannot be claimed as a deduction under current tax laws in India.

Vaishali Pandey
Content Marketer
Check out full profile

A banker turned content marketer with expertise in growth-focused content strategies for the finance and digital sectors.  She currently drives data-backed content initiatives at Propelld, through high-impact storytelling.

Before moving into content marketing, Vaishali spent nearly a decade in banking, across their asset and lending divisions and spent almost a decade in finance. An MBA in Marketing and a writer at heart, she finally took up content marketing and now simplifies money talks for the readers.

She is also a certified digital marketer (MICA), combining data-driven insights with creative storytelling to deliver measurable business growth.

Beyond work, Vaishali is a handcrafted brand founder, avid reader, and travel & food blogger, blending creativity and strategy in everything she does.

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