Graduate tax? Not an issue, say students and firms

Students, technical institutes and companies are taking the Human Resource Development (HRD) ministry's decision to impose a 'graduate tax' or 'exit tax' in their stride.

There's a consensus about paying any such tax, since job opportunities are far more important to students while hiring the right talent is crucial for companies.

The parliamentary standing committee on human resource development this week recommended a "Graduate Tax" or "Exit Tax" from students who take up overseas jobs after passing out from higher education institutions along with their employers who recruit them.

HRD minister, Arjun Singh "" while talking on the sidelines of a lecture he delivered at the University of Mumbai "" confirmed this, but refused to divulge at what rate the tax will be imposed on.

If the graduate or exit tax comes in place, placement officials at the Indian Institutes of Management say it would not make any difference at least to those taking up the jobs only for a few years of international exposure, before coming back to India.

"If the Graduate Tax is a policy handed down as a directive by the HRD ministry, all institutes including the Indian Institutes of Management (IIMs) will have to comply with it. Also, there is no question of any kind of implications since the tax is to be paid by the recruiter and the student who has chosen to opt for an international placement, and not by the institute," said an IIM placement official.

Vijayendra Harlay, PGP second year student at IIM-Ahmedabad, reasons: "If such a tax is imposed on students and recruiters, it will hardly make any difference to either of them because for students the opportunity and job are more important while getting the right talent is equally important to the recruiter."

Lalit Mehta, a PGPX student from IIM-A, says, "In most cases, investment banks and consulting firms would also be open to pick up the graduate tax for the student. The issue here is more of the image we are portraying of India. From being known as an arbitrage of labour cost, everyone across the globe is now looking at India for purely quality reasons, which is why companies are setting up their R&D centres here, however, if such taxes are imposed, it gives a negative message." Other students concur with this view.

Companies, too, think likewise. "It would hardly be an issue even if the proposed tax was up to 10-15 per cent of the final packages offered since hiring students from India was more viable for them than hiring from the US or UK," said a human resources official of a US-based consulting firm which has recruited students from three Indian Institutes of Management "" IIM Ahmedabad, Bangalore and Calcutta "" in March this year.

While the ministry will take some time to roll out the education tax, the institutes are not perturbed if this comes as a policy decision from the HRD ministry.

At present, recruiters pay a service tax of around 12.2 per cent on the total amount earmarked for student packages.

Service tax was levied on the premier higher education institutes in November 2006 by the Central Board for Excise and Customs (CBEC). In this wake, these institutes had hiked their placement fee also.

During placements 2007, IIM Ahmedabad placed 63 students overseas from a batch size of 235 students. IIM Calcutta placed 58 students overseas from a batch size of 251; IIM Kozhikode placed 21 students from a batch size of 156; IIM Lucknow placed 19 students from a batch size of 280 and Jamnalal Bajaj Institute of Management Studies placed 18 students from a batch of 124 students.