Shree Nrasingh General Nursing And Midwifery Prashikshan Sansthan vs. Rajasthan University Of Health Sciences

Held

The Court held that the grant of affiliation by a university is a statutory and regulatory function, not a 'supply of service' under Section 7 of the CGST Act. It reasoned that affiliation is not carried out in the course or furtherance of business, and applying the doctrine of ejusdem generis to Section 2(17), it cannot be equated with trade or commerce. Furthermore, the Court found that affiliation fees do not constitute 'consideration' as there is no element of choice, bargaining, or reciprocity, and the fee is a statutory levy without a clear quid pro quo. Even if affiliation were considered a service, the Court held that it is inseparably connected with essential educational activities like curriculum approval, examinations, and degree conferment, and therefore falls within the ambit of exemption under Entry 66 of Notification No. 12/2017-CT (Rate). The Court concluded that the levy and collection of GST on affiliation fees are illegal and unsustainable. The impugned show cause notices were quashed, and directions were issued for refund of any GST already paid by the petitioners, subject to verification that the burden was not passed on to students.

Facts

The petitioners are educational institutions affiliated with the Rajasthan University of Health Sciences (RUHS) and other universities. They challenged the levy of Goods and Services Tax (GST) on affiliation fees charged by these universities. The petitioners argued that affiliation is a statutory function, not a commercial activity, and the fees are not consideration for a taxable supply. The revenue authorities contended that affiliation constitutes a supply of service, and the fees are consideration for such supply, making them liable for GST. The petitions were filed before the Rajasthan High Court seeking to quash the GST demands and notices.

Key Issues

1. Whether the grant of affiliation by a university to an educational institution constitutes a 'supply of service' under Section 7 of the CGST Act, considering the requirement of carrying out an activity in the course or furtherance of business. 2. Whether the affiliation fees charged by universities qualify as 'consideration' for a supply of service, given the absence of quid pro quo and the compulsory nature of affiliation. 3. Whether services related to affiliation are exempt from GST under Entry 66 of Notification No. 12/2017-CT (Rate), which exempts services relating to education. Petitioner's arguments: The petitioners argued that affiliation is a statutory and regulatory function, not a commercial activity, and thus not a 'supply' under Section 7 of the CGST Act. They contended that affiliation fees are statutory levies, not consideration, as there is no element of choice or reciprocity. They also asserted that even if considered a service, it is intrinsically linked to educational delivery and thus exempt under Entry 66 of Notification No. 12/2017-CT (Rate). Revenue's arguments: The revenue contended that affiliation is a service provided by the university to the colleges, and the fees charged are consideration for this service, making it taxable under GST.