Shiksha Sanchalan And Chikitsha Prasar Samitee 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, as it is not carried out in the course or furtherance of business and does not have a commercial character. Affiliation fees were held not to constitute 'consideration' because there is no element of choice, bargaining, or reciprocity, and the fee is a statutory levy without a clear quid pro quo. Furthermore, the Court found that even if affiliation were considered a service, it is inseparably connected with core educational activities like curriculum approval, examinations, and degree conferment, and thus falls within the ambit of exemption under Entry 66 of Notification No. 12/2017-CT (Rate). The levy of GST on affiliation fees was deemed illegal and unsustainable, as it amounts to an indirect taxation of education, which is impermissible. The Court quashed the show cause notices and directed the refund of any GST already paid by petitioners, provided the burden was not passed on to students.

Facts

The petitioners are educational institutions affiliated with the Rajasthan University of Health Sciences and other universities. They challenged the levy of Goods and Services Tax (GST) on affiliation fees charged by these universities. The petitions were filed before the Rajasthan High Court. The core of the dispute revolves around whether the grant of affiliation by a university to its colleges constitutes a 'supply of service' under the CGST Act, and if the associated fees are 'consideration' for such a supply. The petitioners argued that affiliation is a statutory and regulatory function, not a commercial activity, and that the fees are statutory levies, not consideration for a service. The revenue authorities contended otherwise, seeking to levy GST on these fees.

Key Issues

1. Whether the grant of affiliation by a University to its affiliated colleges constitutes a 'supply of service' under Section 7 of the Central Goods and Services Tax (CGST) Act, 2017, considering the requirement of an activity being carried out in the course or furtherance of business. 2. Whether affiliation fees charged by Universities to affiliated colleges constitute 'consideration' for a supply of service, in the absence of quid pro quo and element of choice or reciprocity. 3. Whether services related to affiliation are covered under the exemption provided by Entry 66 of Notification No. 12/2017-CT (Rate). 4. Whether the levy of GST on affiliation fees is valid in light of statutory provisions and exemption notifications. Petitioner's arguments: The petitioners argued that affiliation is a statutory and regulatory function, not a commercial activity, and therefore not a 'supply of service' under Section 7 of the CGST Act. They contended that affiliation fees are statutory levies and not 'consideration' as there is no quid pro quo. They also argued that even if considered a service, it is exempt under Entry 66 of Notification No. 12/2017-CT (Rate). They relied on the principle that executive clarifications cannot override statutory provisions or exemption notifications. Revenue's arguments: The judgment does not explicitly record arguments made by the revenue or state respondents.