Telangana High Court; GST Exemption Doesn't Cover Affiliation Fee And Inspection Fee Paid By Colleges To University

"we are of the firm view that firstly, the Notification No.12 of 2017, dated 28.06.2017, cannot be made applicable upon inspection and affiliation fees charged by the 1st respondent-University from the educational institutions. Secondly, since so far as inspection and affiliation fees charged by the 1st respondent-University from the educational institutions has not been specifically exempted in terms of the Constitution Bench judgment in M/s. Dilip Kumar and Company (6 supra), the said benefit cannot be extended to the petitioners."

The Division Bench of Justice Sam Koshy and Justice Laxmi Narayana Alishetty also clarified that the notification of 2017 allows exemption only for 3 categories, namely: students, faculty and staff.

"Yet another aspect which needs to be considered is that Notification No.12 of 2017, dated 28.06.2017, provides for exemption of services rendered by the educational institutions to three different categories, i.e., students, faculty and staff. It does not deal with the services rendered by the university to the educational institutions. It does not deal with the services rendered by the university to the educational institutions. ‘Affiliation’ and ‘inspection’ is a service rendered by the university to the educational institutions."

The Bench was hearing a batch of writs filed against the demand notice issued by the Kaloji Narayana Rao University of Health Sciences (K.N.R.U.H.S.) to the various colleges and petitioners herein for payment of GST of 9% S.G.S.T. and 9% C.G.S.T. (a total of 18% as G.S.T.) on affiliation fee and inspection fee as directed by the GST Authorities together with arrears from 2017.

The contention of the counsel on behalf of the counsel was that although the GST Act made 'Educational services' taxable the Notification issued in 2017 and specifically, Serial No. 66 of the Notification provided for certain relaxations to the educational institutions which would include Affiliation fee and Inspection fee.

The counsel further argued that section 2(y) of the GST Act that defines "educational institutions" would include a University within its ambit for 'being an institution providing education services as a part of curriculum for obtaining a qualification' and relied upon The Principal and others vs. The Presiding Officer and others , Chairman, Bhartia Education Society vs. State of Himachal Pradesh and Maharishi Markandeshwar Medical College and Hospital vs. State of Himachal Pradesh to reiterate the same.

The counsel lastly argued that if the GST was allowed to be collected, the college would be compelled to pass on the burden to the students.

The Division Bench discarded the last claim holding that the affiliation fee and inspection fee is a fee paid at the inception of the college and subsequent thereto, students are admitted, "Therefore, the contention that the petitioners have canvassed is hard to accept. "

On the other hand the standing counsel for the Commercial Tax Authorities Advocate Dominic Ferdandes argued that a plain reading of the Notification issued in 2017 would make it evident that affiliation and inspection fee would not be exempted under it.

Further it was stated that the 47th G.S.T. Council Meeting held in June, 2022 resolved that the Notification would not be applicable to affiliation of educational institutions with the Universities and Boards, etc., it was resolved that the Circular issued by the Government of India, Ministry of Finance, Department of Revenue, dated 17.06.2021, would be governing the field. Adding to that, Clause 4(iii) of the Circular would provide for GST @18% so far as services provided by the Board or University so far as accreditation to education institutions is concerned

The standing counsel for Commercial tax also brought to the notice of the Court that The Presiding Officer and others and Chairman, Bhartia Education Society that were heavily relief upon by the petitioners would not be applicable to the facts at hand as the Bench that passed the judgment had relied on Clause 66D of the Finance Act, 1994, that has been omitted since 2016.

The Bench after appreciating the facts put forward by both the sides ordered that exemption cannot be inferred and claimed only when specifically granted.

"Under the taxing law, unless there is a specific exemption granted specifically on inspection fees and affiliation fees, the petitioners cannot be permitted to claim exemption drawing an inference of the affiliation and inspection fees both being part of the Notification No.12 of 2017, dated 28.06.2017, and also being inter-linked to the curriculum which is undertaken by the educational

institutions and the admissions derived therefrom."

The Bench also noted that the Notification No.12 of 2017 was amended further by Notification No. 2 of 2018 which specified all the services provided by an educational institution that would be exempted, and neither did the affiliation fee find place in the list nor did the inspection fee.

The petition of the Colleges was dismissed.

"For all the aforesaid reasons, we do not find any substance in the contentions raised by the learned counsel for the petitioners. Accordingly, the Writ Petition No.34617 of 2022 stands dismissed. Consequently, all the connected writ petitions also stand dismissed. No costs."

W.P.34617 of 2022 & Batch

Counsel for petitioner: Gaddam Srinivas

Counsel for respondent: Dominic Fernandes, Senior Standing Counsel for respondent Commercial Tax

and V. Rajeshwar Rao, Government Pleader for Commercial Tax Department

Click Here To Read/Download Order