Late Moolchand Meena Agriculture College vs. Union Of INDIA

Held

The Court held that the grant of affiliation by a university is a statutory and regulatory function and does not constitute a "supply of service" under the CGST Act, as it is not carried out in the course or furtherance of business and does not fall under the ambit of trade or commerce. Affiliation fees were held not to be "consideration" for any taxable activity because there was no element of choice, bargaining, or reciprocity, and the fee was a statutory levy without a clear quid pro quo. Even if affiliation were considered a service, it was held to be exempt under Entry 66 of Notification No. 12/2017-CT (Rate), as it is inseparably connected with essential educational delivery functions like curriculum approval, examination conduct, and degree conferment. The Court further held that the levy of GST on affiliation fees is illegal and unsustainable, as executive clarifications cannot override statutory provisions or exemptions, and such a levy results in the impermissible indirect taxation of education. The Court quashed the impugned show cause notice and directed the refund of any GST already paid by the petitioner, subject to verification that the burden was not passed on to students.

Facts

The petitioner, Late Moolchand Meena Agriculture College, is challenging an order dated 03.09.2025 passed by Respondent No. 5, which directed the petitioner to deposit GST on an annual affiliation fee. The petitioner contends that the levy and demand of GST on affiliation fees are unsustainable in law, as affiliation does not constitute a taxable service. The respondents are the Union of India, the State of Rajasthan, and various tax and education authorities. The parties have agreed that the controversy has been settled by a previous judgment of the High Court dated 23.02.2026 in Rajasthan Technical University v. Union of India.

Key Issues

1. Whether the grant of affiliation by a university constitutes a "supply of service" under Section 7 of the CGST Act, considering the requirement of an activity being carried out in the course or furtherance of business and the doctrine of ejusdem generis applied to Section 2(17)? 2. Whether affiliation fees constitute "consideration" for a taxable supply, given that affiliation is compulsory, lacks choice or bargaining, and the fee is a statutory levy without a clear quid pro quo? 3. Whether exemption under Entry 66 of Notification No. 12/2017-CT (Rate) is applicable to services forming the backbone of educational delivery, including affiliation, even assuming it to be a service? 4. Whether the levy of GST on affiliation fees is valid, considering that circulars or executive clarifications cannot override statutory provisions or exemption notifications, and such a levy results in indirect taxation of education? Petitioner's arguments: The petitioner argues that affiliation is a statutory function, not a commercial activity, and therefore not a supply of service. Affiliation fees are statutory levies, not consideration for a service. Even if considered a service, it is exempt under Entry 66. The levy of GST is impermissible as it indirectly taxes education. Revenue's arguments: The judgment records that the parties are ad idem with the previous judgment, implying the revenue's arguments would align with the findings in that case, which addressed these issues.