The Hindu : National : Campus recruitment under taxman's scanner

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Thursday, Nov 02, 2006
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National

Campus recruitment under taxman's scanner

Ashok Dasgupta

NEW DELHI : Campus placements have come under the tax net.

Business schools and premier technology institutions of the likes of IIMs and IITs will have to cough up service tax from May this year in case they charge companies a placement fee for campus recruitment. A Central Board of Excise and Customs (CBEC) here on Wednesday, says such placement services rendered by the premier institutes are liable for payment of service tax at the rate of 12.2 per cent.

It said educational institutions such as the IIMs and IITs charge corporate houses or MNCs who come to these institutes for recruiting candidates through campus interviews a fee.

There was some confusion earlier as to whether these educational institutions came under the category of `manpower recruitment supply agency,' and, accordingly, whether service tax can be levied on placement fee.

Circular

The CBEC circular made it clear that service tax was applicable for the activity of manpower recruitment or supply agency. Given the fact that most educational institutes do not have profit as the primary motive, they were not covered under the taxable service definition earlier, till an amendment was carried out in this year's budget.

Following the enactment of the Finance Act, 2006 the expression "commercial concern" was replaced with "any person" and, therefore, anybody engaged in the recruitment or supply of manpower even without commercial concern now comes under the tax net.

The CBEC, however, has left the issue of levying tax on IIMs and IITs to the discretion of field formations. They are now expected to examine the "distinguishable facts" before arriving at "some tangible conclusion" that they have liability to discharge for the past six-month period.

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