Biyani Shikshan Samiti 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 Section 7 of the CGST Act. The Court reasoned that affiliation is a statutory mandate for universities to discharge their core function of imparting education and does not equate to trade or commerce. Consequently, affiliation fees were held not to be 'consideration' for a taxable supply, as there was no quid pro quo. Furthermore, the Court found that even if affiliation were considered a service, it is intrinsically linked to educational delivery, including curriculum approval, examinations, and degree conferment. Therefore, it falls within the ambit of exempt services 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, as it amounts to an indirect taxation of education. The impugned show cause notices were quashed, and directions were issued for the 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/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 GST law and if the fees charged for it are taxable. The petitioners argued that affiliation is a statutory function and not a commercial activity, and the fees are not consideration for a taxable supply.

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 the affiliation fees charged by universities to their affiliated colleges qualify as 'consideration' for a supply of service, given the absence of quid pro quo and the compulsory nature of affiliation. 3. Whether the services related to affiliation are exempt from GST under Entry 66 of Notification No. 12/2017-CT (Rate), which exempts services provided by way of education or educational services. Petitioner's arguments: The petitioners contended that affiliation is a statutory and regulatory function, not a commercial activity, and therefore not a 'supply' under Section 7 of the CGST Act. They argued that affiliation fees are statutory levies and not consideration as there is no element of choice or reciprocity. They also asserted that even if considered a service, it falls under the exemption provided by Entry 66 of Notification No. 12/2017-CT (Rate). They relied on the principle that circulars cannot override statutory provisions or exemption notifications. Revenue's arguments: The judgment does not explicitly record arguments made by the revenue, but it addresses the levy of GST on affiliation fees.