The Andhra Pradesh High Court has held that Goods and Services Tax (GST) cannot be charged on affiliation fees and No Objection Certificate (NOC) fees collected by State universities from affiliated colleges.
It is because such activities are statutory in nature and are not entitled as “business” under the GST regime.
The Bench of Justice R. Raghunandan Rao and Justice T.C.D. Sekhar furnished a judgment in a batch of writ petitions along with the case of Jawaharlal Nehru Technological University, Kakinada (JNTUK), contesting GST demands of the tax authorities.
The issue has emerged after GST authorities issued assessment orders demanding tax, interest, and penalties on fees collected via universities for providing affiliation and issuing No Objection Certificate (NOC) to colleges. For example, JNTUK has encountered a demand surpassing Rs 2.64 crores for July 2017 to March 2020.
The universities stated that they are statutory bodies established under State legislation and perform functions mandated by law and UGC guidelines.
They argued that granting affiliation and issuing NOCs are essential regulatory functions rather than commercial activities. Therefore, they believe these actions do not fall under the definition of “supply” as specified in Section 7 of the CGST Act.
Conversely, the tax department asserted that any service provided for consideration is considered a taxable supply under GST, unless it is specifically exempt. They also pointed out that the universities were not eligible for exemptions under Notification No. 12/2017.
The court, after analysing the statutory structure, held that for an activity to be entitled as a taxable supply, it should be conducted in the course or furtherance of business. It was outlined by the court that statutory liabilities levied on universities cannot be equated with business activities.
Read Also: AP HC Strikes Down Petition Against GST Rectification If an Alternate Remedy Is Available
The Bench said that universities are obligated to process applications for affiliation and grant or refuse it on statutory provisions. Such operations are neither voluntary nor commercial, but are operated in the release of statutory obligations.
The Court mentioned that these universities are not State or local authorities for automatically attracting GST on all activities, and thus their operations should fulfil the test of business to be taxable.
The Court held that statutory functions conducted via universities are outside the definition of business u/s 2(17) of the CGST Act, and therefore, do not constitute “supply” u/s 7. Therefore, GST cannot be charged on these activities.
Since the activities themselves are not charged to tax, the question of claiming exemption under GST notifications does not emerge, the Court stated.
All the impugned assessment orders across the batch of petitions have been set aside by the High Court, and allowed the writ petitions in favour of the universities.
| Case Title | Jawaharlal Nehru Technological University Kakinada (JNTUK) vs. Principal Commissioner Of Central Tax |
| Case No. | No: 23535 of 2023 |
| Counsel for the Petitioner | Lakshmi Kumaran Sridharan |
| Counsel for Respondent | Harinath N, and Santhi Chandra |
| Andhra Pradesh High Court | Read Order |
