Affiliation Fees Collected By Universities Liable To GST: Madras High Court

On Wednesday, the Madras High Court held that affiliation fees collected by universities from affiliated colleges are liable to GST and are not exempt under Notification No. 12/2017-Central Tax (Rate).

A Division Bench of Justice G. Jayachandran and Justice K.K. Ramakrishnan delivered the ruling. The judges were hearing a writ petition filed by Bharathidasan University, challenging the GST demand notices issued for the assessment years 2019-2020 to 2022-23.

They held:

"In India, there are Universities, which are affiliating universities and there are Educational Institutes, which are standalone Universities, which admit students directly, conduct examination and confer degree, but they are not permitted to grant affiliations to college. They are deemed to be Universities. No doubt Universities fall within the definition of Educational Institutions. However, the service of granting affiliation is not part of admission of students or conduct of examination for them."

The University claimed that affiliation fees are exempt from GST under Notification No.12/2017-CTR. It contended that such fees are collected in connection with the admission of students and the conduct of examinations, and therefore fall within the category of exempt educational services. The Department disputed the claim, asserting that affiliation is an independent regulatory activity rendered to colleges and not a service provided to students.

The issue was referred to a Division Bench of the Madras High Court due to conflicting opinions expressed earlier by different Single Benches on the taxability of affiliation fees.

The Division Bench examined the statutory provisions, the exemption notification, and CBIC Circular No. 234/28/2024-GST dated 11 October 2024, which clarifies that affiliation services provided by educational boards and universities are taxable. It observed that affiliation is a precondition for a college to admit students, but is not itself a service relating to admission or conduct of examinations.

"The fees collected for affiliation and for inspection of colleges applied for affiliation, fall beyond the scope of service connected with admission of students and conduct of examination."

The judges also emphasised that exemption notifications under taxing statutes must be construed strictly and cannot be extended by interpretation. They stressed that while universities are educational institutions, not every service rendered by them enjoys exemption from GST. They said:

"...the service provided by Educational Institutions to its students, faculty and staffs were exempted through notification No.12/2017-CTR, which is relied by the petitioner University to seek exemption from paying tax for the affiliation fee collected by the University from colleges seeking affiliation from the said University. However, this exemption is not for all services rendered by the University, but restricted to admission and examination of students only."

Accordingly, the Bench concluded that affiliation fees collected by universities do not qualify for exemption under Notification No. 12/2017 and are liable to GST.

For Petitioner: Advocate, V.R. Shanmuganathan

For Respondent: Additional Government Pleader, R.Sureshkumar