Site icon PaGaLGuY

Budget 2012: ISB Hyderabad fees set to increase by 40k, MBA coaching and hostel mess to cost marginally higher


Finance Minister Pranab Mukherjee delivering the budget speech on March 16, 2012 (Photo: Rajya Sabha TV)

An unintended consequence of budget 2012 is that the cost of studying the Post Graduate Programme (PGP) at the Indian School of Business (ISB), Hyderabad is set to rise by nearly Rs 43,000.

Starting the batch of 2012-13, Indian School of Business (ISB), Hyderabad was going to be levying service tax at the formerly prevailing rate of 10.3% (adding 0.3% education cess) over and above its Post Graduate Programme (PGP) fees, adding approximately Rs 2.07 lakhs to the total fee amount of Rs 20.01 lakhs.

But with today’s budget increasing the total service tax to 12.36% (inclusive of education cess), the tax component of ISB’s fees for a student living in a shared room is all set to go up by Rs 41,468.

Shared accommodation Studio accommodation
Net fees payable Rs 2,013,000 Rs 2,118,000
Service tax pre-budget: 10.3% Rs 207,339 Rs 218,154
Service tax post-budget: 12.36% Rs 248,809 Rs 261,785
Total fees pre-budget Rs 2,220,339 Rs 2,336,154
Total fees post-budget Rs 2,261,807 Rs 2,379,784
Difference Rs 41,468 Rs 43,360

ISB’s 2012-13 batch which begins classes at the Hyderabad and Mohali campuses in mid-April may just be spared from paying the extra amount since their payment transactions would have completed in the 2011-12 financial year. “Service tax is a statutory levy and will be applicable as per the rates prevailing at the time of admission,” said an ISB official adding that the new service tax rate would only be applicable after the tax department sent a notification to the effect to the institute.

Nevertheless, this is a classic case of ancient Indian laws directly affecting the cost of higher education. Although an educational institution accredited by the Association to Advance Collegiate Schools of Business (AACSB) and offering a degree, ISB is not exempt from service tax because the one-year MBA — which is its primary offering — is not recognised by All India Council of Technical Education (AICTE) or any other government body. As a result, paying fees to ISB is considered a commercial transaction chargeable with service tax.

The Indian Institutes of Management (IIMs) have in the past fought for and won the freedom to not charge service tax for their two-year and one-year programmes. Now yesterday’s budget has put all recognised higher education out of the purview of service tax by placing it in the negative list of items exempt from service tax. That leaves only the unrecognised programmes, which will either have to wrest an exemption out of the government or charge students the additional tax.

On its website, ISB Hyderabad writes that,

Service Tax: The effect of the amendment brought about by the Finance Act 2010 to Section 65 (105) (zzc) of the Finance Act, 1994 is presently before the Customs Excise and Service Tax Appellate Tribunal (CESTAT). ISB has always maintained that the said section does not apply to the ‘educational’ programmes of ISB. However Service Tax Department is of the view that Service Tax is applicable on the fees charged to the students by ISB. As per the advice of our legal counsels, to mitigate the risks associated with this levy, ISB will be collecting the Service tax as applicable on the total fee as and when payable by you and remit the same to the Government Account under protest and without prejudice to ISBs rights and contentions in Law. In the event of the said matter ultimately getting resolved in favor of ISB, ISB will provide necessary information to you so as to assist you to obtain refund from the Government.

So ISB too has taken the fight to a tribunal and will refund the tax to students if exempted.

What else about management education has budget 2012 affected? Because of the increase in total service tax from 10.3% to 12.36%, expect MBA entrance coaching institutes to charge higher by a margin of 2.06%. So a coaching product sold at the tax-inclusive price of Rs 20,000 would cost about Rs 370 more.

“The additional service tax will be passed on to the customer. That does not necessarily mean that coaching will become expensive, because centres and franchisees are allowed to offer flexible pricing. The price of coaching is very sensitive to the city it is offered in, so the effect of service tax increase would be marginal,” Gautam Puri of Career Launcher told PaGaLGuY.

Rajiv Sharma, centre head of Career Forum in Agra too agreed that the additional tax would have to be footed by the customers. “Most of us in the coaching business have already cut down our prices because of the competition and are under heavy burden. On top of that, the market for MBA coaching is reducing. So we have no option but to pass on any extra tax liabilities onto the customer,” he said.

There would also be a marginal increase in the mess charges at b-schools that employ private caterers in hostels. However hostels which employ their own staff for cooking and waiting do not come under the ambit of service charge.

Exit mobile version