Blm Medical vs. Rajasthan University Of Health 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. It reasoned that affiliation is not an activity of a commercial character, aligning with the doctrine of ejusdem generis applied to Section 2(17). Consequently, affiliation fees were held not to constitute 'consideration' as there was no quid pro quo and no element of choice or bargaining. Furthermore, even if considered a service, it is inseparably connected with essential educational activities like curriculum approval and examination conduct, 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, considering it an indirect taxation of education. The impugned show cause notices were quashed, and directions were issued for 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/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 revolved around whether the grant of affiliation by a university to its colleges constitutes a 'supply of service' under the CGST Act, and if the fees charged for it are 'consideration'. The petitioners argued that affiliation is a statutory function and not a commercial activity. The revenue authorities sought to levy GST on these fees.

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, 2017? The petitioners contended that affiliation is a statutory and regulatory function, not a commercial activity, and therefore not a 'supply' as defined under Section 2(17) of the CGST Act. They argued that it does not fall under 'trade, commerce, or any activity of commercial character'. The revenue's position was not explicitly recorded on this specific point, but their action implied they considered it a taxable supply. 2. Whether affiliation fees constitute 'consideration' for a taxable supply? The petitioners argued that affiliation is compulsory, lacking elements of choice or reciprocity, and the fee is a statutory levy, not a payment for a negotiated service, thus missing the element of quid pro quo. The revenue's stance on this was not explicitly detailed but implied they considered it consideration. 3. Whether affiliation services are exempt under Entry 66 of Notification No. 12/2017-CT (Rate)? The petitioners argued that even if considered a service, it is integral to educational delivery and should be covered by the exemption. The revenue's argument against this exemption was not explicitly recorded.