Slapped With Tax Notice, IIM Ahmedabad Seeks Ministry’s Help

Faced with a demand for payment of Service Tax to the tune of Rs 52 crore by the Revenue department, IIM Ahmedabad has sought the intervention of the Human Resource Development (HRD) Ministry to resolve the issue.

Media reports said the tax authorities have asked the management institute to pay the Service Tax dues on the 2-year Post Graduate Program (PGP), the postgraduate programme in food and agri-business management (PGP-FABM), the fellow programme in management (FPM), equivalent to a PhD and the 1-year Postgraduate Program in Management for Executives (PGPX) as taxable from 2009-10.

Service Tax has been demanded for the period 2009-10 to 2014-15 on the fee received for these four programs, as per the order passed by Principal Commissioner of Central GST (Ahmedabad South).

IIMA has, in its letter to the Ministry on January 31, contended that as an educational institute, it has always been covered under categories that are exempted from paying service tax. The Tax Department, however, had issued the notice treating the IIM as “a commercial coaching centre.”

Deepak Bhatt, Manager, Communications at IIMA was quoted by the Indian Express as saying that the institute has requested the intervention of the HRD Ministry and appealed to the Tribunal on February 13.

IIMA has, in its letter to the Ministry on January 31, contended that as an educational institute, it has always been covered under categories that are exempted from paying service tax. The Tax Department, however, had issued the notice treating the IIM as “a commercial coaching centre.”

“As the Principal Commissioner of Central GST has passed an order, the institute has no option but to appeal to the Tribunal by paying Rs 4.01 crore as per deposit fee, 7.5% of the service tax demand of Rs 52 crore, which will block the fund and strain the resources of the institute,” IIMA Director Errol D’Souza stated in the letter.

The four-page letter also pointed out that a Finance Ministry notification in March 2016 had exempted the 2-year full-time PGP, FPM and the 5-year Integrated Program in Management, which are offered by all the IIMs, from Service Tax.

D’Souza had requested HRD Minister Prakash Javadekar to take up the matter with the Finance Ministry to revoke the order passed by the Revenue authorities.

Meanwhile, the newspaper quoted sources in IIM Calcutta as saying that the institute had written to the HRD  Ministry in April seeking clarification on the levy of GST that has replaced the service tax, on its programs after the implementation of the IIM Act, especially with regard to the Postgraduate Diploma in Business Analytics and Management Development Programs. IIMC has sought exemption from GST for these programs.

It is also to be noted that students in the 1-year programs at the IIMs have been worst hit as there is no exemption from GST with the program getting clubbed with the part-time executive programs. They are having to bear the excessive taxation at 18% despite being in the same situation as their counterparts in 2-year PGP, having had to forgo full-time employment, salary and other allowances, for the entire duration of the program.