Affiliation & NOC Fees collected by Universities outside GST Net: AP HC struck down Demand against Universities [Read Order]

The Andhra Pradesh High Court has ruled that affiliation fees and No Objection Certificate (NOC) fees collected by State universities do not fall under the Goods and Services Tax ( GST) net. The court set aside tax demands issued against the universities and quashed assessment orders demanding over ₹2.64 crore, along with applicable interest.

The petitions were filed by Jawaharlal Nehru Technological University Kakinada (JNTUK), Acharya Nagarjuna University, Adi Kavi Nannayya, University, Vikrama Simhapuri University and Krishna University, when the GST authorities attempted to tax the affiliation and NOC fees that public universities collect from their affiliated colleges.

The department classified these fee collections as a consideration for the “supply of services” under the Central Goods and Services Tax (CGST) Act, 2017. Pushing back against this heavy levy, the universities argued that they are statutory bodies created under State legislation.

They submitted that granting affiliations or issuing NOCs is not a commercial enterprise, but a mandatory statutory duty governed by University GrantsCommission (UGC) regulations, thus placing these activities completely outside the scope of taxable business operations.

The High Court, agreeing with the universities, conducted an examination of Sections 2(17), 7, and 9 of the GST Act.

The bench noted that GST can only be levied on supplies made in the course or furtherance of a "business." The Court noted that the core functions of these universities such as granting affiliations are strict statutory obligations rather than voluntary, profit-driven commercial activities.

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Furthermore, the High Court clarified that although the universities are established under State Acts, they do not automatically qualify as “State” or “local authorities” in a way that would blindly attract GST on all their administrative activities.

The bench of R. Raghunandan Rao and Justice T.C.D Sekhar decided that, “The term “business‟, as defined in Section 2(17), clearly does not include statutory functions, which are cast upon the petitioner universities. The activities mentioned in Section 2(17) are voluntary actions. However, the petitioner universities are duty bound and are mandated to consider and grant or refuse to grant affiliation or No Objection Certificates. In such a situation, the activity of the petitioner universities in granting affiliations is a statutory function and is not a business activity. Consequently, the activities of the petitioner universities do not constitute supply of service as provided in Section 7 of the GST Act. Consequently, these services would not be exigible to tax”

The Court also stated that since the activities themselves do not qualify as taxable supplies in the first place, there was no need to even evaluate exemption notifications, such as Entry 66 of Notification No. 12/2017 which deals with educational services.

Accordingly, the demand was quashed.

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