University Affiliation, NOCs Not 'Supply', No GST On Statutory Functions: Andhra Pradesh High Court

The Andhra Pradesh High Court, on 27 April, held that services provided by universities, such as grant of affiliation and issuance of No Objection Certificates (NOCs), are not liable to GST, as these activities are statutory in nature and do not qualify as “business” or “supply” under GST law.

A Division Bench of Justices R. Raghunandan Rao and T.C.D. Sekhar, while hearing a batch of writ petitions including those filed by Jawaharlal Nehru Technological University, Kakinada and other similarly placed State universities, also held that amounts collected for affiliation, accreditation, and related approvals are not taxable services under the GST framework. It observed:

“...the petitioner universities are duty bound and are mandated to consider and grant or refuse to grant affiliation or No Objection Certificates. In such a situation, the activity of the petitioner universities in granting affiliations is a statutory function and is not a business activity. Consequently, the activities of the petitioner universities do not constitute supply of service as provided in Section 7 of the GST Act. Consequently, these services would not be exigible to tax.”

The petitioners contended that granting affiliation to colleges and issuing NOCs are statutory obligations under the respective University Acts, and are neither optional nor commercial in nature. They argued that under Section 7 of the GST Act, only supplies made in the course or furtherance of business are taxable.

The Revenue argued that under the GST regime, particularly in light of Sections 2(17) and 7, services provided by government or similar bodies may be taxable irrespective of whether they are carried out in the course of business.

Rejecting this contention, the Court held that the petitioner universities are separate legal entities created under State legislation and cannot be equated with the Central Government, State Government, or local authorities. It therefore held that provisions expanding the scope of “business” for government bodies are not applicable. The Bench observed:

“The petitioner universities are all universities which are separate entities, created and established under the Acts of the State Legislature and they are not part of the State Government or Local Authority. They are not part of the Central Government either. In such circumstances, the provisions of Section 7(2) or Section 2(17)(i) would not be applicable to the petitioner universities.”

The Court further held that the definition of “business” under GST does not include statutory functions cast upon the universities. Since they are duty-bound to grant or refuse affiliation and issue NOCs in accordance with statute, such activities cannot be treated as voluntary or commercial, and therefore do not constitute “supply” under Section 7 of the GST Act.

On the issue of exemption notifications, the Bench held that since the services themselves are not taxable, the question of claiming exemption does not arise.

Accordingly, the High Court set aside the impugned GST demands and allowed the writ petitions.

For Petitioner: Advocate, Lakshmi Kumaran Sridharan 

For Respondent: Deputy Solicitor General of India, Harinath N, and Junior Standing Counsel, Santhi Chandra for CBIC