IIM placements under taxman's lens

Annual campus placement jamboorees at India's management meccas not only ring in great salary offers for their students, they also set cash registers at the Indian Institutes of Management on fire.

Every time an IIM student gets picked up by a global player, the IIM itself gets Rs 250,000. And even recruiters from India have to cough up some cash.

The trouble is, taxmen have got into the act and the finance ministry now says that IIMs will have to pay service tax on earnings from placements, a decision that IIMs are going to challenge soon.

"From domestic recruiters we charge a fixed fee called participation charge and a variable fee. The variable fees are charged from recruiters who place students in India, on the basis of number of students they hire," Piyush Sinha, head (Placement Cell), IIM Ahmedabad, told Profit.

So how much has IIM Ahmedabad made this year from the placement process? It has raked in more than Rs 2 cr (Rs 20 million) on placements, of which about Rs 1.5 cr (Rs 15 million) has come from overseas recruiters. And even the less hyped IIMs are making serious money from placements.

For example, IIM Bangalore and IIM Calcutta have raked in a total of Rs 2 crore between themselves. And the smaller IIMs have earned between Rs 1 and 1.5 cr.

The IIMs say the money raised goes straight to a corpus, which is used to develop campus infrastructure and to subsidise course fees.

"This follows the stand taken by the government earlier. We charge this amount to cut subsidies for students, so recruiters actually fund part of the education charges for the students," said Bakul Dholakia, director, IIM Ahmedabad.

The only dark lining in this silver cloud is the service tax charge and the IIMs understandably unhappy with it.

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