Ravindra Pal Singh Parmar Mahavidyalaya, Kaman, District Bharatpur vs. The State Of Rajasthan

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 Section 7 of the CGST Act. It was reasoned that affiliation is not an activity carried out in the course or furtherance of business, nor can it be equated with trade or commerce. Consequently, affiliation fees were held not to be 'consideration' as there was no element of choice, bargaining, or reciprocity, and the fee was a statutory levy without quid pro quo. Furthermore, even if considered a service, it is inseparably connected with core educational activities and thus falls within the ambit of exemption under Entry 66 of Notification No. 12/2017-CT (Rate). The Court found the levy of GST on affiliation fees to be illegal and unsustainable, as circulars or executive clarifications cannot override statutory provisions or exemption notifications, and such a levy results in indirect taxation of education, which is impermissible. The impugned show cause notices were quashed, and directions were issued for refund of any GST already paid by the 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/or Rajasthan Technical University. 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 whether the associated fees are 'consideration' for such a supply, making them liable for GST. The petitioners argued that affiliation is a statutory function and not a commercial activity.

Key Issues

1. Whether the grant of affiliation by a University to its colleges is 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. 2. Whether the affiliation fees charged by the University constitute 'consideration' for a supply of service, requiring the presence of quid pro quo and voluntariness. 3. Whether services related to affiliation are exempt under Entry 66 of Notification No. 12/2017-CT (Rate), which pertains to educational services. 4. Whether the levy of GST on affiliation fees is valid, considering potential conflicts with statutory provisions and exemption notifications. Petitioner's arguments: The petitioners contended 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 argued that affiliation fees are statutory levies without a quid pro quo, thus not constituting 'consideration'. They also asserted that such services are covered under the exemption notification. The revenue's arguments: The revenue's position, implied by the challenge, was that affiliation fees are consideration for a taxable supply of service, attracting GST.