University’s Affiliation Fees are Statutory levies, exempt from GST: Bombay HC quashes Tax Demand on Educational Activities [Read Order]

The Bench comprising Justice M.S Karnik and Justice Nivedita P. Mehta, heard and reviewed the matter filed by the Petitioner, Goa University, established under the Goa University Act, 1984.

The Petitioner, Goa University, filed a writ petition under Article 226 of the Constitution of India, initiating a legal challenge against a show cause notice dated 05.08.2024 issued by respondent no.1 - Joint Commissioner of Central Goods and Service Tax (CGST), Goa Commissionerate, proposing to demand GST on the educational activities of the petitioner University, specifically Affiliation fees.

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The Petitioner even contested the validity and legality of the Circular dated 17.02.2021 and 11.10.2021, issued by the respondent no.2 - Central Board of Indirect Taxes and Customs. It, further, also challenged the legality of the Press Note dated 09.09.2024 issued to summarize recommendations made in the 54th meeting of the GST Council, which is recognized as the respondent no.-3.

The Petitioner, provided higher education in the State of Goa offering both degrees, for graduation and post-graduation programmes and in terms of the statutory scheme, had granted affiliation to around 67 colleges in the State of Goa and had collected 'affiliation fee'.

Furthermore, in January 2024, GST Authorities began investigating whether the University should pay tax on affiliation and other fees collected since July 2017. After examining the financial records, show cause notice dated 05.08.2024 was issued by respondent no.1, under Section 74 of the CGST Act, 2017, demanded Rs.4,83,59,747/- along with the interest and penalties, on the taxable value of Rs. 27,45,33,672/- including student related activities. The University was asked to appear before respondent no.1 on 24.10.2024.

The Petitioner, represented by Raghuram, Senior Advocate, submitted that the show cause notice as being without jurisdiction, GST cannot be levied on education-related activities. The University argued that its educational activities, being statutory and non-commercial, do not constitute 'business' under section 2(17) of the CGST Act, and therefore, the affiliation fees collected are not 'consideration' for a 'supply of services'. It further contended that its services are exempt under Entry No. 66 of Notification No. 12/2017-CT (R) dated 28.06.2017 and that the impugned circulars unlawfully restricted the scope of this exemption.

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Subsequently, The Respondents, represented by Asha Desai, Senior Standing Counsel, submitted that the petition was not maintainable under the shelter of challenging circulars, only to derail and delay the adjudication and effectively asserted that affiliation services provided by educational institutions are taxable under Notification No.12/2017 dated 28.06.2017. They argued that the exemption was limited and did not cover affiliation fees.

After hearing from both the parties and reviewing the materials on record, the High Court ruled in the favour of the Petitioner. It held that University’s Activities, being statutory and regulatory in nature, were not commercial business activities, thus exempted from GST. The HC observed that the Affiliation fees collected while discharging public functions did not qualify as 'consideration' for 'supply of services' under section 7 of the Central Goods and Services Tax Act, 2017.

Furthermore, the Bombay High Court determined that the University, as an educational institution, provided services that were covered under the existing exemption notification, and that the impugned circulars, being contrary to statutory provisions, could not restrict the scope of this exemption. Consequently, the High Court also found lack of Jurisdiction to issue the show cause notice.

Therefore, the Bombay High Court quashed the tax demand.

The high court, thereafter, pointed out that the University designs curricula, conducts examinations, and awards degrees-making affiliation an integral part of the education process, not a separate commercial or business activity. Thus, this judgement protects educational institutions from GST demands.

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