`IIMs collect placement fees only to keep education cost low'

Gaurav Raghuvanshi

Tax woes

Asked what

would happen if the IIM lost its case with the Service Tax Department, Prof Dholakia said the companies visiting the campus had been informed about the possible liability.

Ahmedabad, March 17

The Government gets to make nothing out of the top-dollar salaries being doled out at the Indian Institute of Management, Ahmedabad (IIM-A) as the institute has refused to collect service tax from recruiters visiting it for campus placement.

"IIM-A can by no stretch of imagination be compared with a manpower placement agency. We are opposing this on principle," the IIM-A Director, Prof. Bakul Dholakia, told

Business Line

on Monday.

The institute had recently been served a notice by the Service Tax Authorities in Ahmedabad but IIM-A had disputed the levy.

"They thought they could get some money from us. We have replied to the notice and have not heard from them after that. The IIMs collect the placement fees from recruiters only to keep the cost of education low for the students and this principle has been agreed upon by the Government," Prof Dholakia said.

The Institute spends over Rs 3.5 lakh on every student during the two-year course while it collects only Rs 1.58 lakh as fees and other charges. Asked what would happen if the IIM lost its case with the Service Tax Department, Prof Dholakia said the companies visiting the campus had been informed about the possible liability.

"If we lose, the companies will have to pay the tax. But as of now, we have not collected any money either from the students or their employers as possible service tax liability.

"The big paying international recruiters are exempt from service tax anyway," he said.

IIM-A charges $5,000 per student from international recruiters as placement fee while for domestic employers, the figure has a fixed component plus a per-student charge. Domestic companies pay a fixed fee that ranges from Rs 40,000 to Rs 1.75 lakh depending on the day they are slotted, plus Rs 50,000 per student. Back of the envelope calculations reveal that IIM-A will get $350,000 (about Rs 1.66 crore) from international recruiters while another Rs 1 crore will come in from the domestic companies who visited the campus. The service tax, if payable, will apply only to the money collected from domestic companies.

(This article was published in the Business Line print edition dated March 18, 2006)
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