Students of one year MBA / One Year MBA for Executives and other programs leading to a management degree at the Indian Institutes of Management (IIMs) will benefit from the tax exemption granted by the GST Council as IIM Bangalore has secured exemption from Goods and Services Tax (GST) for all long-duration programs including the one year full-time MBA (EPGP).

The Tax Research Unit of the Department of Revenue, in a circular, has clarified its position regarding grant of GST exemption to educational institutions. Till now, only the two-year full-time PGP (Post-Graduate program in management) and FPM (Fellow Program in Management) were exempted from GST at IIMB.

Tax Exemption Details

Along with EPGP, two other programs, the Post Graduate Program in Public Policy and Management (PGPPM) and the Post Graduate Program in Enterprise Management (PGPEM) are now exempt from GST.

Earlier, the EPGP, because of its ‘executive’ tag, was clubbed together with the other part-time executive programs for working professionals and denied any tax concessions. IIMB had approached the Authority for Advance Ruling (AAR) Karnataka seeking clarification and later the GST Council to rectify the anomaly.

A Times of India report quoting an IIMB spokesperson said the institute will receive a refund of Rs 4.03 crore in taxes it has already paid for 2018-19. So far, it has refunded Rs 3.93 crore to 235 students who had paid the tax along with the fees.

IIMB Director G Raghuram, welcoming the tax exemption as a positive move, however, said he would not be able to comment on whether it would lead to a reduction in the fees saying that the tax was only one component.

The EPGP Program (2019-20) fee is Rs 25,89,000 (shared accommodation) and Rs 27,24,500 (family accommodation).

The exemption, announced by the GST Council in a circular on January 1, 2019, would also benefit the one-year program students at IIM Ahmedabad, IIM Indore, IIM Lucknow and IIM Calcutta.

The Council’s decision to exempt all Degree Certificate programs at IIMs came after a prolonged struggle by the Institutes against the imposition of the GST. For instance, IIM Indore had in 2018 approached the Authority for Advance Ruling of Madhya Pradesh (AAR) seeking exemption but the request was turned down at that time. (see: https://www.oneyearmba.co.in/without-executive-tag-no-respite-18-gst-1-year-mba-programs-india/)

Revenue Department Clarification

Susanta Mishra, Technical Officer (TRU), explained the position regarding tax exemptions granted to the IIMs  In Circular No. 82/01/2019-GST, dated January 1, 2019.

He said according to the provisions of the Indian Institutes of Management Act, 2018 which came into force on January 31, 2018, all the IIMs listed in the schedule to the IIM Act are “institutions of national importance”.

They are empowered to grant degrees, diplomas, and other academic distinctions or titles, specify the criteria and process for admission to courses or programs of study and the academic content.

“Therefore, with effect from 31st January 2018, all the IIMs are “educational institutions” as defined under notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 as they provide education as a part of a curriculum for obtaining a qualification recognised by law for the time being in force,” he added.

“At present, Indian Institutes of Managements are providing various long duration programs (one year or more) for which they award diploma/ degree certificate duly recommended by Board of Governors as per the power vested in them under the IIM Act, 2017.

“Therefore, it is clarified that services provided by Indian Institutes of Managements to their students- in all such long duration programs (one year or more) are exempt from levy of GST,” he added.

The circular noted that during the period from July 1, 2017, to January 30, 2018, IIMs were not covered by the definition of educational institutions as given in notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. Thus, they were not entitled to exemption under Sl. No. 66 of the said notification.

However, a specific exemption was granted to three programs, namely the two-year full-time PGP, to which admissions are made on the basis of Common Admission Test (CAT) conducted by the IIMs, the Fellow Program in Management (FPM) and the 5-year Integrated Program in Management (IPM).

Therefore, for the period from 1st July 2017 to 30th January 2018, GST exemption would be available only to the three long-duration programs specified above, the circular said.

“It is further clarified that with effect from 31st January 2018, all IIMs have become eligible for exemption benefit under Sl. No. 66 of notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. As such, specific exemption granted to IIMs vide Sl. No. 67 has become redundant. The same has been deleted vide notification No. 28/2018- Central Tax (Rate) dated, 31st December 2018 w.e.f. 1st January 2019.

The tax exemption will not be applicable to short-duration certificate programs for executives/professionals. These will continue to attract the standard rate of GST @18% (CGST 9% + SGST 9%), it said.

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