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

The Madras High Court has held that affiliation fees collected by universities from colleges are liable to Goods and Services Tax (GST). The Court ruled that such services do not fall within the GST exemption for services relating to the admission of students or the conduct of examinations.

The Division Bench comprising Justice G. Jayachandran and Justice K. K. Ramakrishnan answered a reference arising from writ petitions filed by Bharathidasan University challenging GST notices issued by the State tax authorities.

The dispute arose after the Joint Commissioner of GST (ST-Intelligence), Trichy Division, issued notices under Section 74(5) of the Tamil Nadu Goods and Services Tax Act, 2017, alleging tax liability on affiliation fees collected by the University from affiliated colleges for the financial years 2019-2020 to 2022-2023.

The University contended that such fees were exempt from GST under Notification No.12/2017-Central Tax (Rate), arguing that affiliation services were connected with the functioning of affiliated colleges which admit students and conduct examinations.

The Bench referred to Entry 66 of Notification No.12/2017-Central Tax (Rate) which exempts certain services provided by or to educational institutions, particularly services relating to the admission of students or conduct of examinations. The Court held that this exemption is limited in scope and does not extend to every service performed by a university.

The bench opined that,

"The exemption notification indicates that services relating to admission or conduct of examination by the Educational Institutions alone are exempted from service tax. Therefore, any services prior to admission of candidates or conduct of examination cannot be brought within the scope of expression “services relating to admission to, or conduct of examination by, such Institution”.

The Bench also took note of CBIC Circular No.234/28/2024-GST dated 11.10.2024, issued under Section 168(1) of the CGST Act, which clarified that affiliation services provided by educational boards or similar bodies are not services relating to admission or conduct of examinations and are therefore taxable, except where provided to government schools, which were later specifically exempted.

The bench stated that "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."

Rejecting the University's argument that affiliation is intrinsically connected with student admissions, the Court held that services relating to granting affiliation are independent of the process of admitting students or conducting examinations.

Accordingly, the Court answered the reference by holding that affiliation charges collected by universities from affiliated institutions are taxable under GST, and remitted the matter back to the Single Judge to consider the remaining issues raised in the writ petitions.

For Petitioner: Advocate, V.R. Shanmuganathan

For Respondent: Additional Government Pleader, R. Sureshkumar