Public Rose Shiksha Samiti vs. Rajasthan University Of Helth Sciences

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. Applying the doctrine of ejusdem generis to Section 2(17), affiliation cannot be equated with trade, commerce, or any activity of a commercial character. Consequently, affiliation fees are not 'consideration' for any taxable activity, as there is no quid pro quo and no element of choice or bargaining. Even if considered a service, affiliation 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 levy and collection of GST on affiliation fees were held to be illegal and unsustainable, amounting to an indirect taxation of education. The Court quashed the impugned show cause notices and directed the refund of any GST already paid on affiliation fees, provided 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 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 service. The petitioners argued that affiliation is a statutory function and not a commercial activity, and 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 doctrine of ejusdem generis and the definition of 'business' in Section 2(17)? 2. Whether affiliation fees charged by Universities to their affiliated colleges constitute 'consideration' for a supply of service, as defined under the CGST Act, in the absence of quid pro quo and free will? 3. Whether the exemption under Entry 66 of Notification No. 12/2017-CT (Rate) is applicable to affiliation services, considering their integral connection with educational delivery, including curriculum approval, examinations, and degree conferment? 4. Whether the levy of GST on affiliation fees is valid, particularly in light of executive clarifications and the potential for indirect taxation of education? Petitioner's arguments: Affiliation is a statutory and regulatory function, not a commercial activity. Fees are statutory levies, not consideration. Exemption under Entry 66 applies. Levy is illegal. Revenue's arguments: Not recorded in the judgment.