The Indian Institutes of Management Bill, 2017 that received Cabinet approval on January 24 and introduced in the Lok Sabha on February 9, has extended the exemption from service tax to the 2-year full-time Post Graduation Programs (PGP) to non-residential PGP programs and all others except for those carrying the tag ‘executive’.
The changes in the Bill have put the students of the 1-year full-time MBA programs in the IIMs at a disadvantage as the program, mostly carrying the ‘executive’ tag to distinguish it from the PGP, gets no exemption from service tax. Instead, it gets clubbed with executive programs, generally part-time courses aimed at working professionals.
Some students of the 1-year programs at IIMs have started a petition on Change.org addressed to Prime Minister Narendra Modi seeking his intervention for rectifying this anomaly. Meanwhile, another petition moved by oneyearmba.co.in wants to incorporate an amendment in the IIM Bill that MBA recognition should be granted only for 1-year MBA since that is the one with global accreditation.
The students said the IIMs have four types of programs. While the 2-year full-time residential program is for freshers and experienced professionals, the one-year full-time residential program is for experienced professionals only. The Institutes also offer part-time MBA programs and Executive development programs.
“In the service tax exemption granted to MBA programs, the government has only covered the two-year full-time residential MBA program. This is a request to include one-year full-time residential MBA program into service tax exemption provision,” they said in the petition.
“The Government has excluded Executive Development Courses from Service tax exemption provision as these programs are meant for professionals who are in a job and want to enhance skills. The company in which the professionals work sponsors these programs and hence the company makes the service tax payment on behalf of the professional for the course,” they pointed out.
Earlier, an exemption was provided to IIM vide entry No 9B of mega exemption notification for residential post graduation programmes (PGP). It is now extended to non-residential PGP courses as well. Thus, non-residential management programs will get cheaper. A two-year IIM PGDM distance learning course costing Rs 16 lakh will now be cheaper by Rs 2.08 lakh.
The petition said the executive courses offer only a certificate while PGP and the 1-year program graduates are awarded a diploma.
“At present service tax is exempted from two-year PGP course from IIMs. So we request our government to apply the same principle to one year MBA course in IIMs as one year MBA students also do not earn employment benefits.
“It is believed (by many students) that while making the service tax exemption provision in the law for the MBA program, the Government clubbed One year full-time residential MBA program with Executive Development Courses as currently there is very low awareness of the one-year full-time residential MBA program offered by IIMs,” the petition said.
The 1-year full-time residential MBA program is totally different from Executive Development courses and is rather similar to the 2-year full-time residential MBA program in terms of education imparted as both have similar contact hours.
“Executive development programs at IIMs are normally sponsored by organisations. Therefore, no impact of service tax gets transmitted to students directly. But in both two-year and one-year MBA course, students have no source of income i.e. salary, perks etc. The students have to make the service tax payment out of his/ her pocket, which is clearly an additional burden on the student taking the loan for completion of the course,” they added.
“At present service tax is exempted from two-year PGP course from IIMs. So we request our government to apply the same principle to one year MBA course in IIMs as one year MBA students also do not earn employment benefits.
It is the policy of Government of India to make quality education available to the students without demanding undue service tax from them. The current demand of service tax in one-year full-time residential program hinders the objectives. It is hoped that the Government shall look into the matter and bring the much-needed amendment in the law so as to remove current discrepancy in the law,” they said.
The petition has so far been signed by 339 supporters. Explaining the reason for signing the petition, Harcharan Singh says the government has not made efforts in understanding that one year MBA is similar to 2 year MBA and not part time MBA in which people are working and studying at the same time. Just like 2 year MBA students the one year MBA students pay fees (more than 2-year ones), leaving their jobs (in which they were getting paid more than 2-year ones) to study and reach new heights. Therefore, exemption given for 2-year MBA should also be applicable for 1-year executive MBA also.
The petition moved by oneyearmba.co.in points out while there is talk about the Bill empowering IIMs to grant MBA degrees to graduates of the two-year PGP course, there is simply nothing about conferring the MBA degree on the One Year MBA, the real contender for this degree.
The Association of MBAs (AMBA), the top global accreditation body for business education programs, has granted recognition to 1-year programs including IIM Indore’s EPGP (Executive Post Graduate Program in Management), IIM Lucknow’s IPMX (International Program in Management for Executives) and IIM Calcutta’s PGPEX (Post Graduate Programme for Executives) as MBA.
The two-year PGP program at IIMs is accredited only as a Masters in Business Management (MBM). As per AMBA’s accreditation standards, an MBA course must admit students with 3+ years of work experience while an MBM can admit candidates with 0-3 years work experience. So students with less than 3 years of work experience are eligible to pursue an MBM only, not an MBA.
Since the two-year PGP courses at IIMs largely recruit freshers (most admits have less than a year of work experience ), these courses are accredited as MBMs by AMBA.
The course at IIMs that is globally accredited as a Full-Time MBA is the One Year MBA. With its stricter eligibility norms, these courses admit candidates with a minimum of 5+ years of work experience and therefore meet and exceed global norms for an MBA course.
Despite these facts, there is simply no discussion on conferring MBA degree status on the One Year MBA course at IIMs, when it is the sole and rightful bearer of the MBA nomenclature at IIMs. The two-year PGP course that is being considered for MBA status should be granted the status of an MBM Degree in keeping with its global accreditation.
The IIMs will be compromising their credibility if they award an MBA for a course that does not meet international criteria for being called one.
The petition addressed to the Prime Minister, has so far been signed by 782 supporters.