The GST Appellate Tribunal (GSTAT), Delhi has held that affiliation services provided by the Council for the Indian School Certificate Examinations constitute an independent taxable supply and are not covered by the GST exemption for services relating to admission or conduct of examinations. However, the Tribunal set aside the demand raised under Section 74 for July 2017 to August 2018 after finding no evidence of fraud, wilful misstatement or suppression of facts with intent to evade tax.
The Bench comprising Judicial Member Sanjay Kumar Aggarwal and Technical Member Rajiv Kapoor held that affiliation fees and affiliation form-processing charges collected for the period from June 18, 2021 to November 2023 were taxable. It also upheld the taxability of annual registration charges and late registration charges for the period from September 2018 to November 2023.
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At the same time, the Tribunal extended substantial relief to CISCE by setting aside the invocation of the extended limitation period under Section 74 of the Central Goods and Services Tax Act, 2017 for July 2017 to August 2018. Consequently, the tax demand, interest and penalty relating to that period were set aside.
The Tribunal further directed that the fees collected by CISCE must be treated as inclusive of GST and granted the benefit of cum-tax valuation under Rule 35 of the CGST Rules, 2017. The tax authorities were directed to recompute the surviving tax liability, interest and penalty in accordance with the Tribunal’s findings.
CISCE is a society registered under the Societies Registration Act, 1860 and is engaged in granting affiliation to schools, conducting the ICSE and ISC public examinations, registering students and undertaking various academic programmes. It is also registered as a charitable organisation under Section 12A of the Income-tax Act, 1961.
An investigation was initiated by the anti-evasion branch of the CGST Delhi East Commissionerate on the basis of information that CISCE had not paid GST on several categories of fees collected from affiliated schools and institutions.
During the proceedings, the department found that CISCE was paying GST on activities such as training programmes and sale of scrap but had not paid tax on affiliation fees, annual registration charges, documentation charges, licence fees and certain other receipts. CISCE maintained that these receipts were exempt under Entry 66 of Notification No. 12/2017-Central Tax (Rate), which grants exemption to specified educational services.
The department calculated an aggregate GST liability of approximately ₹20.90 crore for the period from July 2017 to November 2023. Of this, approximately ₹3.35 crore was proposed under Section 74 for July 2017 to August 2018 by invoking the extended period on allegations of suppression, while approximately ₹17.54 crore was proposed under Section 73 for September 2018 to November 2023.
The adjudicating authority confirmed the demands along with interest. It also imposed an equivalent penalty in respect of the demand raised under Section 74, a penalty of approximately ₹1.75 crore in respect of the Section 73 demand and a general penalty of ₹25,000 under Section 125 of the CGST Act.
In the first round of appeal, substantial relief was granted to CISCE in relation to documentation charges, late-entry fees and licence fees.
Documentation charges collected for correction of records, duplicate mark sheets, migration certificates and verification of documents were held to be directly connected with the examination process and therefore exempt.
Late-entry fees paid by students for delayed payment of examination fees were also treated as part of the examination framework and were held exempt. In the case of licence fees received for granting publishing rights over syllabuses and previous question papers, the liability was found to fall upon the recipient under the reverse charge mechanism.
The first appellate authority also applied Circular No. 234/28/2024-GST dated October 11, 2024 and regularised GST on affiliation services for the period from July 1, 2017 to June 17, 2021 on an “as is where is” basis. A demand of approximately ₹2.59 crore on affiliation fees and affiliation form-processing charges for that period was accordingly set aside.
However, the demand on affiliation-related charges from June 18, 2021 to November 2023 was confirmed. The demand on annual registration charges and late registration charges was upheld for the entire period.
After the first appellate order, the surviving GST demand was approximately ₹1.29 crore for July 2017 to August 2018 and approximately ₹9.12 crore for September 2018 to November 2023.
Before the Tribunal, CISCE argued that it was a non-profit educational body and that its activities could not be treated as business or supply under the CGST Act. It submitted that affiliation was not an independent commercial service but an integral and indispensable part of the examination system.
The Tribunal rejected this contention. It held that CISCE’s activities constituted “supply” within the meaning of Section 7(1)(a), read with the inclusive definition of “business” under Section 2(17) of the CGST Act.
The Tribunal observed that CISCE was a society registered under the Societies Registration Act and was not a statutory university constituted under a Central or State enactment for performing compulsory statutory functions. Decisions rendered in the context of statutory universities could therefore not be mechanically applied to CISCE.
Accordingly, the Tribunal held that the affiliation services provided by CISCE fell within the charging provisions of the CGST Act.
CISCE contended that affiliation was the first and foundational stage of the examination process because a school without affiliation could not present students for the ICSE or ISC examinations. On that basis, it claimed that affiliation was covered by the exemption for services relating to admission to or conduct of examinations under Entry 66(b)(iv) of Notification No. 12/2017.
The Tribunal did not accept the argument. It held that affiliation was an independent supply concerned with examining whether a school possessed the necessary infrastructure, finances, faculty and other facilities required to obtain and retain affiliation.
Such services were regulatory and institutional in character and could not be equated with services directly relating to the admission of students or conduct of examinations.
The Tribunal consequently upheld the demand on affiliation fees and affiliation form-processing charges for the period from June 18, 2021 to November 2023. The earlier regularisation of affiliation services for July 1, 2017 to June 17, 2021 was left undisturbed.
The Tribunal also rejected CISCE’s contention that annual registration charges and late registration charges were merely a continuation of affiliation and should receive the same treatment.
It held that these charges were administrative and preparatory in character. The fact that non-payment could result in de-affiliation was described as a commercial consequence of the obligation undertaken by affiliated schools and not a factor that could convert the charges into examination-related services.
The Tribunal emphasised that a fiscal exemption must be strictly interpreted. Entry 66(b)(iv) was confined to services relating to admission to or conduct of examinations and could not be expanded to cover administrative or preparatory services.
It further held that the “as is where is” regularisation under Circular No. 234/28/2024 was specifically confined to affiliation services. Since the circular made no reference to annual registration charges, renewal charges or late fees, its benefit could not be extended to those receipts by implication.
The taxability of annual registration and late registration charges was therefore upheld, subject to the Tribunal’s separate finding on limitation.
CISCE had also challenged the issuance of a single consolidated show-cause notice covering the period from July 2017 to November 2023.
The Tribunal rejected this ground and held that a consolidated notice covering multiple financial years would not become invalid merely because of its consolidated format. In the absence of demonstrated prejudice, confusion, denial of opportunity or jurisdictional incompetence, consolidation remained a matter of procedure.
Since CISCE had been provided a full opportunity to respond and had not established any specific prejudice, the proceedings were not liable to be invalidated on this ground.
The most significant relief was granted on the invocation of Section 74 for the period from July 2017 to August 2018.
The Tribunal held that Section 74 could be invoked only where non-payment or short-payment of tax was caused by fraud, wilful misstatement or suppression of facts with intent to evade tax. Mere failure to pay GST or obtain timely registration could not, by itself, satisfy this statutory threshold.
The Tribunal noted that CISCE had been contesting a similar liability under the erstwhile service tax regime and had consistently maintained that its activities were exempt. The existence of a genuine dispute over interpretation was inconsistent with an allegation of deliberate tax evasion.
It also relied upon the GST Council’s decision to regularise affiliation services for the period up to June 17, 2021. According to the Tribunal, this regularisation amounted to a government-level acknowledgement that the taxability of affiliation services was affected by sector-wide interpretational uncertainty.
The Tribunal observed that it would be incongruous to treat the issue as genuinely ambiguous for the entire sector while simultaneously alleging that CISCE had acted with a clear and fraudulent intention to evade tax.
The Bench also noted that the department had sought details from CISCE in March 2023 and CISCE had furnished item-wise information regarding the fees collected. A demand communication had thereafter been issued in May 2023, several months before the inspection conducted in December 2023.
Therefore, the department was already aware of the nature and quantum of the receipts. Once the relevant facts were known to the authorities, the failure to correctly self-assess the liability could not automatically be treated as suppression.
The Tribunal accordingly set aside the Section 74 demand of approximately ₹1.29 crore for July 2017 to August 2018, along with consequential interest and penalty.
CISCE also succeeded in its claim that the amounts collected from schools should be treated as inclusive of GST.
The Tribunal observed that CISCE had not separately collected GST over and above the notified fees. Relying on Rule 35 of the CGST Rules and judicial precedents governing cum-duty and cum-tax valuation, it held that where tax had not been separately recovered, the gross consideration should be treated as inclusive of tax.
The Tribunal therefore directed the authorities to calculate GST by working backwards from the total amount collected, instead of treating the entire receipt as the taxable value and adding GST over it.
The Tribunal ultimately held that The Section 74 proceedings and demand for July 2017 to August 2018 were unsustainable and stood aside. Affiliation fees and affiliation form-processing charges for June 18, 2021 to November 2023 remained taxable. Annual registration charges and late registration charges for September 2018 to November 2023 remained taxable. The amounts collected by CISCE must be treated as inclusive of GST. No penalty was leviable for July 2017 to August 2018 or on affiliation-related charges for the regularised period from July 2017 to June 2021. The penalty under Section 122(2)(a) would survive only to the extent of the tax demand ultimately sustained. The general penalty of ₹25,000 under Section 125 was upheld. Interest under Section 50 would be payable only on the amounts finally confirmed and from the respective dates of default.
The department was directed to recompute the final tax liability, interest and penalty after granting cum-tax benefit and implementing all the findings of the Tribunal.
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