Will IIMs, IITs have to pay tax on placements?

The imposition of service tax on premier educational institutes like IIMs and IITs for placement charges they receive from companies is still a grey area as the interpretation of a relevant notification lay with jurisdictional commissioners.

The commissioners  will interpret on a case-to-case basis the changes brought about in the service tax notification on May 1 this year, a finance ministry official said.

A clearer picture on the issue is likely to emerge only before the placement season next February. Placement services were brought under service tax net from 1997, but was applicable only on commercial concerns.

The changes brought about this year implied, according to an interpretation, that all including educational institutions getting placement charges from companies will have to pay service tax.

The changes followed objections raised by CAG that some institutes are not paying service tax on placement charges they get from companies.

The CBEC is also carrying out a survey whether educational institutes are liable to pay such a charge prior to May 1, 2006 as well, the official said.

The survey is being carried out after IIM, Bangalore won an appeal against imposition of the tax. The institute along with IIM, Ahmedabad, was issued a show cause notice in March by the service tax department and both of them had disputed the notices.

The Bangalore commissioner had rejected the demand of the department by ruling that IIM-B was not a commercial concern. The claims on IIM-A is yet to be given a ruling.