Service tax on placement fee on case by case basis: CBEC

New Delhi, Nov 1 (UNI) The government today clarifed that service tax on placement fee from companies after May 1, 2006, for campus recruitment by Institutes like IIMs and IITs will be decided on a case by case basis, even though they will not have to pay this tax prior to this date.

A Central Board of Excise and Customs(CBEC) circular issued earlier in the day said services rendered by such premier institutes are liable to pay service tax at 12.2 per cent. Educational institutes charge a fee from prospective employers who take recourse to campus recruitment for their companies.

The issue which the CBEC clarified related to whether these educational institutes fall in the category of 'manpower recruitment supply agency' and accordingly, whether service tax can be levied on the placement fee.

The circular said the service tax was leviable for the activity of manpower recruitment or supply agency only if undertaken by a commercial concern. The fact that most educational institutes do not have profit as their motive, they were not covered earlier under the taxable service definition till the amendment was carried out in the Finance Act, 2006.

With the enactment of Finance Act, 2006, the words 'commercial concern' was replaced with 'any person.' The position was clarifed after the issue had been cleared by the CBEC Board.

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