With Or Without ‘Executive’ Tag, No Respite from 18% GST for 1-Year MBA Programs In India

The 1-year management education programs offered by some of the Indian Institutes of Management (IIMs) for persons with professional experience, would continue to pinch the participants’ pocket, attracting GST (Goods and Services Tax) at the rate of 18%, according to the latest ruling by a competent authority.

The Indian Institute of Management, Indore (IIM-I) had approached the Authority for Advance Ruling of Madhya Pradesh with the contention that its 1-year full-time Executive Post Graduate Program in Management (EPGP) was to be exempted from GST as per the provisions of the Indian Institute of Management Act 2017, notified with effect from January 31.

It had also sought a ruling on whether the fees collected for the academic session 2018-19 was exempt from the tax and if it was applicable for the fees collected before the enactment of IIM Act 2017.

The IIM had approached the authority seeking clarification on two notifications issued under the Act in November and December 2017.  While one notification had imposed GST at the rate of 18% per cent on educational services, the second granted exemption for certain categories.

While the two-year full-time (PGP) Post Graduate Programs in Management, meant for fresh graduates without any mandatory work experience requirements were exempted from GST, the Executive Development programs attracted 18% GST.

The Authority held that the Executive Post Graduate Programme will not be eligible for exemption from GST. Also, such programme being conducted by the applicant shall be chargeable to GST, irrespective of enactment of IIM Act 2017, it ruled.

The exemption covered the services provided by an educational institution to its students, faculty and staff. Various services such as catering, security and conducting examination provided to the educational institutions also will not attract GST.

Similarly, the Fellow Program in Management and the 5-year Integrated Program in Management were exempted from the tax.

IIM-Indore had contended that services provided by an educational institution as a part of the curriculum for obtaining a qualification recognised by any law in force are exempted under notification for exemption. The degrees and diplomas granted are also recognised by law by virtue of being granted under the IIM Act.

The IIM also stated before the Authority that the 1-year EPGP, provided by it as an institute under the IIM Act, the program qualifies to be exempted from GST.

However, the Authority ruled out any ambiguity in the notification. The entry in the notification seeks to exempt various education programs conducted by IIMs, except the Executive Development Programme, from payment of GST. It is, thus, clear that irrespective of enactment of IIM Act 2017, the intention of the legislature was not to tax the flagship education programmes conducted by these institutions.

“However, specific exclusion of Executive Development Programme from exemption has been made loud and clear, leaving no scope for any interpretation or reading between the lines,” it stated.

The Authority held that the Executive Post Graduate Programme will not be eligible for exemption from GST. Also, such programme being conducted by the applicant shall be chargeable to GST, irrespective of enactment of IIM Act 2017, it ruled.

This is not the first time that the ‘Executive’ tag has cast a shadow over the 1-year program that figures in international rankings, including the FT global MBA ranking. In some instances, the tag has made international ranking agencies like Eduniversal to mistakenly put Indian 1-year programs in the rankings meant for the part-time executive MBA programs that are not in the same class by any reckoning.

Some of the IIMs like IIM Lucknow had dropped the executive tag from its 1-year IPMX program. IIM Indore has also branded the EPGP program as “The One Year Full Time Post Graduate Programme in Management.”

“Since the word ‘executive’ is a misnomer, we have taken a conscious decision of doing away with the word ‘Executive’ as it is misleading and confuses the corporate world. So, we have also modified the phrase – “MBA programme for working executives” to “MBA Programme for experienced professionals,” the IIM had stated in a press release on August 14, 2018.(Image Source:wikipedia.org)