The Indian Institutes of Management (IIM) have won the fight for service tax exemption on fees generated by short-duration open enrolment Executive Programmes.
The Central Board of Excise and Customs, a wing of the department of revenue under the finance ministry, has gone back on its decision to charge service tax on these programmes.
In 2009, the commissioner of service tax issued notices to IIM Ahmedabad to pay tax on fees generated from open enrolment executive programmes. But the institute decided not to pay up and approached HRD minister Kapil Sibal, who discussed the matter with finance minister Pranab Mukherjee.
The IIMs have been opposing service tax on fees generated from courses being offered to company executives through open enrolment. They have been saying these courses are not-for-profit programmes and the fee generated supplements the revenue of the institutes.
The finance ministry has now decided that the notices issued to the IIMs should be dropped, Sharma said in the reply.
The service tax-related problem of the IIMs was taken up with the finance ministry. The revenue department has informed us that CBEC has examined the issue and concluded that service tax is not chargeable on such programmes conducted by the IIMs, which confer recognised degrees/diplomas, R.P. Sharma, the chief public information officer in the HRD ministry, told The Telegraph in reply to an RTI application.
The IIMs have been paying service tax of about 10 per cent on fees generated from other consultancy and customised training programmes for executives.
Unlike customised programmes for specific clients, the short-duration open enrolment executive programmes are more general in nature and executives from any organisation can participate in them.
We are not opposed to service tax on executive programmes that are part of our consultancy work. But the open enrolment executive programmes are like any other academic programme. It does not involve any profit. Hence, we have been asking for exemption from service tax, IIM Ahmedabad director Sameer Barua said.
IIM Kozhikode director Debasis Bhattacharya has welcomed the CBEC decision. We are happy with this decision. The money generated by such programmes is spent on development of the institute. Since IIMs do not depend on the government for funds, service tax should not be charged on such programmes.
Source ; Business World