Circular No. 86/4 /2006-ST
1st November, 2006
F. No. 137/71/2006-CX.4
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Excise and Customs)
Subject: Service Tax liability on institutes like IITs or IIMs charging fee for campus interviews -reg.
Educational institutes like IITs and IIMs charge a fee from prospective employers like corporate houses / MNCs, who come to these institutes for recruiting candidates through campus interviews. A doubt has arisen as to whether these educational institutes fall in the category of ‘manpower recruitment or supply agency’ and accordingly, whether service tax is leviable on this fee.
2. As per the provisions of the Finance Act, 1994, the ‘taxable service means any service provided or to be provided to a client, by a manpower recruitment or supply agency in relation to the recruitment or supply of manpower, temporarily or otherwise, in any manner’. The definition of ‘manpower recruitment or supply agency’, prior to 1.5.2006, was, “any commercial concern engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, to a client.” However, w.e.f. 1.5.2006, the words “commercial concern” have been replaced by the words “any person”.
3. The issue that requires resolution is whether such educational institutes fall within the definition of ‘manpower recruitment or supply agency’, and if so whether they were so covered even prior to amendment made w.e.f. 1.5.2006.
4. The issue has been examined by the Board. A commercial concern is an institution / establishment that is primarily engaged in commercial activities, having profit as the primary aim. It is not one / few isolated activities which determine whether or not an institution is a commercial concern. It is the totality of its activity and the objective of its existence that determines the commercial nature of an institution as an ‘entity’ or a ‘concern’. The principal activity of institutes like IITs or IIMs is to impart education without the objective of making profit. Therefore, these institutes cannot be called a commercial concern, even if on some of their activities (like holding campus interviews), they charge fee. Accordingly, these institutes were not liable to pay service tax prior to 1.5.2006 under the category of “manpower recruitment or supply service”. As regards the period after 1.5.2006, decision should be taken after taking into account all material facts on case to case basis.
5. Trade and field formations may be advised accordingly.