No GST on University Affiliation Fees: Rajasthan HC

The Rajasthan High Court has held that affiliation fees and related regulatory charges collected by universities from their affiliated colleges are not taxable under the Goods and Services Tax (GST) because they are part of statutory, non-commercial educational functions. The Bench of Justice Arun Monga and Justice Yogendra Kumar Purohit has observed that the grant of affiliation by a State University is an integral statutory duty essential to the academic process and does not amount to a “supply of service” in the course of business liable to GST. The Court quashed the show-cause notice and all consequential proceedings issued against Rajasthan Technical University under Section 74 of the CGST/RGST Acts The controversy arose after GST authorities initiated proceedings against RTU, treating the act of granting affiliation to colleges as a “supply of service” under Section 7 of the Central Goods and Services Tax Act, 2017 (CGST Act). The department sought to levy GST at 18% on affiliation fees collected from academic years 2017–18 to 2022–23, along with interest and penalty. Relying on an Advance Ruling in the case of Bharathiar University, Tamil Nadu, which had held affiliation services taxable, the department demanded GST from RTU. Although maintaining that the levy was not applicable, RTU deposited ₹4.25 crore towards GST and ₹3.02 crore towards interest prior to issuance of the show cause notice. Subsequently, the department issued a notice under Section 74 of the CGST Act alleging suppression and willful evasion, prompting RTU to approach the High Court. The Court framed the following core questions. Firstly, whether grant of affiliation constitutes a “supply of service” under Section 7 of the CGST Act? Secondly, whether affiliation fees amount to “consideration”? Thirdly, whether such services, even if taxable, fall under the exemption provided in Entry 66 of Notification No. 12/2017-CT (Rate)? Fourthly, whether the invocation of Section 74 (fraud/suppression) was legally sustainable? The High Court held that grant of affiliation is a statutory and regulatory function integral to the university’s core mandate of imparting education. It is not a commercial activity undertaken “in the course or furtherance of business,” which is a mandatory condition under Section 7(1)(a) of the CGST Act. The Bench observed that affiliation is the sine qua non for colleges to admit students, conduct classes, hold examinations, and award degrees. It is a compulsory statutory mandate under the Rajasthan Technical University Act, 2006, and not a voluntary commercial transaction. The Court further held that the definition of “business” under Section 2(17) of the CGST Act does not encompass statutory educational regulation. Education cannot be equated with trade, commerce, profession, or any similar commercial pursuit. Importantly, the Court ruled that affiliation fees are statutory levies and not “consideration” as defined under Section 2(31) of the CGST Act. There is no quid pro quo in the commercial sense. The fees are collected to regulate academic standards, conduct examinations, and confer degrees — all public duties discharged by the University. Since there was no “supply” in the course of business and no valid “consideration,” the charging provision under Section 9 of the CGST Act was held inapplicable. Even assuming that affiliation could be treated as a service, the Court held that it would fall within the ambit of Entry 66 of Notification No. 12/2017-CT (Rate), which exempts services provided by educational institutions relating to admission and conduct of examinations. The Bench adopted a broad interpretation of the phrase “relating to” and held that affiliation is intrinsically connected with admissions, examinations, and conferment of degrees. Students of affiliated colleges are effectively university students, and affiliation is for their benefit. The Court relied on judicial precedents, including decisions in Goa University v. Joint Commissioner of CGST and Bengaluru North University v. Joint Commissioner of Central Tax, which had similarly interpreted educational functions expansively. The department had argued that exemption notifications must be strictly construed and that affiliation services were not specifically mentioned in Entry 66. However, the High Court rejected this narrow interpretation, holding that exemption entries must be interpreted purposively in light of the statutory framework governing universities. It warned that isolating clauses of Section 7 or the notification would lead to contradictions and absurd results. On the issue of penalty, the Court found no evidence of fraud, willful misstatement, or suppression with intent to evade tax — mandatory conditions for invoking Section 74. The University had acted under a bona fide belief that affiliation services were exempt. Fully cooperated with GST authorities. Voluntarily deposited GST and interest before issuance of the show cause notice. Not collected GST from affiliated colleges. The Bench observed that a statutory university functioning as an instrumentality of the State cannot be presumed to have acted with mens rea to evade public revenue. The Court also emphasized that penalty provisions under GST were unsustainable in this case because the university had acted in good faith, cooperated with authorities, and even deposited tax and interest prior to the show-cause notice — negating any allegation of fraud or intent to evade tax. Among the legal team representing the university, Mr. Rahul Lakhwani, Advocate (Senior Partner) alongwith Ms. Shreya Jhanwar, Advocate (Associate) at Chir Amrit played a key role in presenting arguments that affiliation fees were part of statutory regulatory responsibilities and not a commercial supply. Case Details Case Title: Rajasthan Technical University Versus UOI Citation: JURISHOUR-154-HC-2026(Raj) Case No.: D.B. Civil Writ Petition No. 9556/2024 Date: 23/02/2026 Counsel For Petitioner: Sharad Kothari Counsel For Respondent: Mahaveer Bishnoi, AAG Click Here To Read Order Read More: CBIC Allocates Charges Amongst Its Members

No GST on University Affiliation Fees: Rajasthan HC

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