The Telangana High Court has declared that Goods and Service Tax (GST) exemption does not extend to affiliation and inspection fees paid by colleges to universities. Justices Sam Koshy and Laxmi Narayana Alishetty, comprising a Division Bench, observed that the GST exemption, as outlined in Notification No.12 of 2017 of the GST Act, 2017, for institutions offering education services, does not encompass the affiliation and inspection fees paid by colleges to universities.
The court addressed a batch of writ petitions filed by educational institutions challenging a demand notice issued by the University (the 1st respondent). This notice issued by the university sought payment of GST on affiliation and inspection fees, along with arrears from July 2017 onward.
According to the writ petition, the university instructed colleges to submit 9% S.G.S.T. and 9% C.G.S.T. (a total of 18% as GST) on the affiliation and inspection fees via Demand Draft within 10 days. The university, established under Act 6 of 1986, requires affiliated colleges to undergo inspection procedures, charging fees for both inspection and affiliation.
Respondents 2 and 3 raised a GST demand on the affiliation and inspection fees from the university, leading to a subsequent demand from the university to the petitioner educational institutions. This demand prompted the filing of the present writ petition.
The petitioner’s counsel argued that the amendment to Serial No.66 of Notification No.12 of 2017, dated 28.06.2017, makes it clear that affiliation and inspection fees fall within the exempted category.
However, the respondent-Department’s counsel contended that a plain reading of Serial No.66, even after amendments, does not exempt affiliation and inspection fees.
The counsel for the respondent-Department further referred to the 47th GST Council Meeting held on 28/29.06.2022. During the meeting, the GST Council resolved that services provided by educational institutions to students, faculty, and staff are exempted. However, it was specifically noted that the Circular issued by the Government of India, Ministry of Finance, Department of Revenue, dated 17.06.2021, would govern the issue of affiliation of educational institutions with universities and boards. As per Clause (4)(iii) of the said Circular, GST at 18% applies to such services provided by the Board or University concerning the accreditation of educational institutions.
The bench noted that “Notification No.12 of 2017, dated 28.06.2017, which stood amended further vide Notification No.2 of 2018, dated 25.01.2018, specifically enumerates the specific nature of service rendered by the educational institutions which would stand exempted. Inspection and affiliation fees however is not part of the said notification granting exemption. Yet another aspect which needs to be considered is that Notification No.12 of 2017, dated 28.06.2017, provides for exemption of services rendered by the educational institutions to three different categories, i.e., students, faculty and staff. It does not deal with the services rendered by the university to the educational institutions. ‘Affiliation’ and ‘inspection’ is a service rendered by the university to the educational institutions for which the university had charged the respective educational institutions.”
Subsequently, the bench dismissed the writ petition and all other connected writ petitions without costs.
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