The Hon’ble Karnataka High Court in Bengaluru North University & others v. Joint Commissioner of Commercial Taxes & others [WP No. 4254/2024 & others, order dated April 22, 2025] held that fee collections by universities like affiliation fees, registration fees, and convocation fees do not amount to a “supply” or “business” under GST law, thus are not taxable. The Court quashed show cause notices and orders imposing GST on such fees, holding that universities perform statutory, non-commercial functions and that the impugned CBIC circulars and GST demands violated the extant legal and constitutional framework.
Facts:
The Bengaluru North University, Rajiv Gandhi University of Health Sciences, and Visvesvaraya Technological University (“the Petitioners”) are statutory universities established under respective State Acts to oversee education, including affiliating colleges and conducting examinations.
The Joint Commissioner, Central and State GST authorities (“the Respondents”) issued various show cause notices and demand orders alleging GST liability on affiliation fees, registration fees, convocation fees, and related charges collected from students and affiliated colleges over multiple financial years.
The Petitioners contended that their core activities pertain to education and regulatory roles, which are constitutional obligations and not commercial ventures. Therefore, such fees are not “consideration” for a taxable supply and fall outside GST’s ambit. They challenged the legal validity of circulars interpreting such fees as taxable, asserting those circulars exceed authority, and the demands violated fundamental legal principles.
The Respondents argued that services provided by universities, including affiliation and related fees, constitute taxable supplies under GST. They maintained that the definition of “business” and “supply” in GST is expansive and that the circulars issued by CBIC lawfully clarified the taxability.
Aggrieved by GST demands and interpreting circulars, the petitioners filed writ petitions under Articles 226 and 227 of the Constitution, seeking quashment of notices and orders and clarifications limiting GST applicability.
Issues:
- Whether activities like affiliation and other related functions performed by statutory universities amount to a “supply” or “business” under GST law?
- Whether fees collected for these services qualify as “consideration” and such activities are taxable despite exemptions under GST notifications?
- Whether CBIC circulars imposing GST liability on these fees are valid?
Held:
The Hon’ble Karnataka High Court in WP No. 4254/2024 & others held as follows:
- Observed that, universities perform statutory functions mandated by State Acts, including affiliation, regulation, curriculum design, examination, and degree grant, which are constitutional obligations to facilitate education and do not constitute “business” or commercial activities under GST.
- Noted that, the definition of “business” under Section 2(17) and “supply” under Section 7 of the CGST Act require commercial intent and contractual considerations, which are absent in statutory university activities and fees.
- Held that, fee collections such as affiliation fees, registration fees, and convocation fees are statutory/regulatory in nature and lack the character of consideration triggering GST liability and quashed all GST show cause notices and orders based on impugned CBIC circulars No. 151 dated June 17, 2021, and No. 234 dated October 11, 2024 that attempted to tax these activities.
- Noted that, such fee collections do not amount to taxable supplies, and circulars trying to limit exemptions or broaden tax scope are beyond CBIC’s regulatory authority.
Our Comments:
The Karnataka High Court judgment harmonizes with the established jurisprudence recognizing education, particularly university statutory activities, as outside the commercial ambit of GST. It affirms that taxation under GST requires three foundational elements: defined “supply,” “business,” and “consideration,” and that universities’ regulatory and educational roles neither constitute a commercial business nor arise from contractual consideration.
By highlighting decisions like T.M.A. Pai Foundation v. State of Karnataka [(2002) 8 SCC 481] the Supreme Court had held that Education is a constitutional obligation, not trade/business; educational institutions’ activities are not commercial and therefore not subject to business taxes such as GST.
In the case of Principal Additional Director General, DGGSTI v. Rajiv Gandhi University of Health Sciences [(2024) 22 Centax 526 (Kar.)] the Karnataka High Court (Division Bench) held that Affiliation fees are statutory and regulatory fees, not consideration under GST; Universities qualify as “educational institutions” and thus services to students via constituent colleges are exempt from GST.
Similarly in Assistant Commissioner of Income Tax (Exemptions) v. Ahmedabad Urban Development Authority[ (2023) 4 SCC 561] the Supreme Court held that, Fees collected by statutory bodies for fulfilling statutory functions are not consideration for supply of services under GST and that regulatory and statutory functions are not commercial activities.
In light of the recent case of Goa University v. Joint Commissioner of Central Goods and Service Tax & Ors [WP No. 723/2024 order dated April 15, 2025] by the Bombay High Court (Goa Bench) held that, affiliation fees and related university fees are not taxable under GST as university activities are not commercial and fall under educational exemption; the decision quashes GST demands based on such fees.
Relevant Provisions:
Section 7, CGST Act, 2017:
“7. Scope of supply.-
(1) For the purposes of this Act, the expression – “supply” includes-
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration.
Explanation .-For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;
(b) import of services for a consideration whether or not in the course or furtherance of business; and
(c) the activities specified in Schedule I, made or agreed to be made without a consideration”
Section 2(31), CGST Act, 2017:
“”Consideration” in relation to the supply of goods or services or both includes-
(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;
(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:
Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;”
Entry 66, Notification No. 12/2017-Central Tax (Rate), dated June 28, 2017
“Heading 9992- NIL
Services provided –
(a) by an educational institution to its students, faculty and staff;
(b) to an educational institution, by way of,-
(i) transportation of students, faculty and staff;
(ii) catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory;
(iii) security or cleaning or housekeeping services performed in such educational institution;
(iv) services relating to admission to, or conduct of examination by, such institution; upto higher secondary:
Provided that nothing contained in entry (b) shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent.”
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