The Indian Institutes of Management are planning, and in some cases have decided, to hike their placement fees this academic year.
While IIM Lucknow has already hiked the fee, IIM Kozhikode has decided to increase the same by 25 per cent. IIM Bangalore, too, would increase its fee by 12.2 per cent if forced to pay the service tax and IIM Calcutta also does not rule out an increase in placement fees or fees for its full-time MBA course.
IIM Ahmedabad, however, will not increase the placement fee, at least for this year.
The placement fee hike in these premier management institutes comes in the wake of the Central Board for Excise and Customs (CBEC) levying a 12.2 per cent service tax on the placement fee collected by the IIMs and Indian Institutes of Technology.
Placement charges vary at IIMs. At IIM-A, for instance, multinational firms are charged between $5,000-$6,000 for every student that the MNC picks up. Charges for Indian companies are fixed between Rs 40,000 and Rs 150,000 for interviewing students -- depending on the day slotted to the firm to hold the interview.
Besides, Rs 25000 to Rs 50,000 is charged from the Indian companies based on the offers accepted by the students. The institute spends over Rs 350,000 on every student during the two-year course while it collects only Rs 158,000 as fees and other charges.
On an average, IIM-A's realisation through placement fee is over Rs 2 crore (Rs 20 million). Other institutes realise between Rs 50-80 lakh (Rs 5-8 million) from placement fee every year.
With the 12.2 per cent tax being levied, these institutes will have to shell out anywhere between Rs 6.10 lakh-Rs 9.76 lakh (Rs 610,000-976,000). IIM-A however, would shell out Rs 24.40 lakh (Rs 2.44 million).
IIMs say they collect placement fees from recruiters only to keep the cost of education low for the students. But with the new regime in place, they have no option but to abide by it. The institutes have started informing companies on the proposed hike and are positive that companies will receive it well.
The money generated through placements at these institutes is utilised by the IIMs towards meeting capital expenditure and other campus related expenses. But while the IIMs are all set loosen their purse strings, IITs are still not able to figure out why they have been included in the tax net. The management schools at IITs do not charge any placement fee from the companies and thus the confusion.
IIM Calcutta, meanwhile, is still trying to figure out the modalities of taxation. "At this point we are not quite sure of the applicability, conditions and timing of the new rule. We have not received any formal notification on this from the tax authorities and are still awaiting a final confirmation from the government. But if the rule is imposed, we will increase the placement fee," said a professor from IIM Calcutta.
The IIMs had vehemently opposed payment of service tax on placement fee on the grounds of being non-profit making institutes. IIM Ahmedabad (IIM-A) and IIM Bangalore (IIM-B) were issued showcause notices this March by the service tax department. Both IIMs had contested the notices.
While IIM-B won the appeal on the grounds that it is not a commercial concern, notice to IIM-A is still to be adjudicated up on. IIM-B maintains since it has won the appeal it is not supposed to pay any such tax but if the government makes it mandatory, the institute has no other go.