The Karnataka High Court has quashed a series of Goods and Services Tax (GST) demands raised against three major state universities, ruling that affiliation and related statutory fees collected from colleges and students do not amount to a commercial activity liable to GST.
The bench of Justice S.R.Krishna Kumar has observed that the activities of Universities are not commercial in nature and cannot be termed as “supply” in the course or furtherance of business and consequently, activities incidental to education cannot be brought to tax under the GST regime on the ground that it amounts to a business; so also, the fee collected by the Universities is not consideration and the activities undertaken by the Universities are statutory and regulatory in nature; the services provided by the Universities are exempt from GST in terms of Entry No. 66 of Notification No. 12/2017-CT (R) dated 28.06.2017 and the impugned Circulars dated 17.06.2021 and 11.10.2024 are illegal and invalid in law.
The petitions were filed by Bengaluru North University (BNU), Rajiv Gandhi University of Health Sciences (RGUHS), and Visvesvaraya Technological University (VTU), challenging multiple show cause notices and circulars issued by the Central and State tax authorities. The universities argued that GST should not be levied on statutory fees such as affiliation charges, postgraduate registration, admission, and convocation fees, as these are part of their statutory functions.
According to the petitions, the tax authorities had demanded GST on affiliation and other university fees collected between 2017–2024, with demands running into several crores BNU was slapped with a demand of ₹8.09 crore on fees of over ₹44 crore. RGUHS faced cumulative demands exceeding ₹27 crore across four financial years. VTU received the largest demand, at ₹47.06 crore for 2017–19 alone, with additional liabilities for later years.
The demands were based on two controversial CBIC circulars (June 17, 2021 and October 11, 2024) and a GST Council press note, which clarified that affiliation services were taxable at 18%.
The universities argued that education is a statutory and charitable function, not a “business” under GST law. Fees collected by universities are regulatory in nature, not “consideration” for services. Previous rulings, including the Supreme Court’s decision in T.M.A. Pai Foundation v. State of Karnataka (2002) and the Bombay High Court’s April 2025 verdict in Goa University v. Joint Commissioner of GST, supported exemption for educational institutions. Circulars issued by the Tax Research Unit (TRU) lacked authority under the CGST Act.
The departments contended that the universities were providing taxable services, citing the wide scope of the term “business” under the GST law. They relied on a Telangana High Court ruling (Care College of Nursing v. Kaloji Narayana Rao University of Health Sciences, 2023), which had upheld GST applicability on certain university charges.
The court held that universities are statutory bodies engaged in imparting education, which is neither “trade” nor “commerce” and therefore not a taxable business activity. Fees like affiliation and registration are integral to the education system, not commercial services. Circulars attempting to tax affiliation fees were contrary to the CGST Act and exceeded the scope of delegated powers. The issue stood covered by the recent Bombay High Court ruling in Goa University’s case, which quashed similar demands.
The Court set aside the GST show cause notices, orders, and circulars issued against the three universities.
Case Details
Case Title: M/S Bengaluru North University Versus Joint Commissioner Of Central Tax
Case No.: Writ Petition No. 4254 Of 2024 (T-Res)
Date: 22nd April, 2025
Counsel For Petitioner: V. Raghuraman, Senior Advocate
Counsel For Respondent: Aravind V Chavan
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