Affliation fees collected by Universities- Taxable under GST or not?

 “Education” is not defined in the CGST Act but as per Apex Court decision in “Loka Shikshana Trust v/s CIT”, education is process of training and developing knowledge, skill and character of students by normal schooling.

Taxing the Education Sector has always been a sensitive issue, as education is seen more as a social activity than a business one. The government has a constitutional obligation to provide free and compulsory elementary education to every child. Thus, to promote education, it would be beneficial if educational services are exempted from tax. However, commercialisation of education is also a reality. The distinction between core and ancillary education is blurring and education is now an organised industry with huge revenues. The GST Act tries to maintain a fine balance whereby core educational services provided and received by educational institutions are exempt and other services are sought to be taxed at the standard rate of 18%.

Directorate General of GST Intelligence ( DGGI), is actively pursuing GST demand on services provided by universities. Bulk of what these universities collects in terms of revenue represents " Affliation Fees". Over this Article, lets understand whether the Affiliation fees collected is taxable under GST or not?

As per serial No. 66 of Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017, the following educational services are exempted under GST law, and the same was subsumed from Service Tax regime. 

Services provided –

(a) by an educational institution to its students, faculty and staff;

(aa) by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee

(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; 

Provided that nothing contained in [sub-items (i), (ii) and (iii) of item (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.

Provided further that nothing contained in sub-item (v) of item (b) shall apply to an institution providing services by way of,- 

(i) pre-school education and education up to higher secondary school or equivalent; or 

(ii) education as a part of an approved vocational education course.

(v) supply of online educational journals or periodicals

Its evident that before we assess whether the "Affiliation fees" is taxable under GST law or not, we have to satisfy the entire scenarios given in serial no 66 of Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017.

In the case of MADURAI KAMARAJ UNIVERSITY VERSUS JOINT COMMISSIONER, OFFICE OF THE COMMISSIONER OF GST AND CENTRAL EXCISE, MADURAI- 2021 at Madras High Court.

The Court is of the concerned view that, that kind of narrow or pedantic interpretation cannot be possible in the words “conduct of examination”. The reason being, the very prime function of the petitioner university under the statute, under which it has been created, under Section 4(4) of the University Act, which has been quoted herein above, is to hold examinations and to confer degrees, titles, diplomas and other academic distinctions. Therefore, holding or conducting an examination is primarily a job of the university and the colleges affiliated to the university are only facilitators. Therefore, examinations are not conducted directly by the colleges, it is being conducted by the university, but the facilitator is the college. Therefore, the word “conduct of examination by such institution” means, conduct of examination by the university and the college and not by the college alone. The examination is the examination of the university, for which, facilitation is given by the college, wherein the examinations are conducted and ultimately, valuation is to be done by the university and marks are awarded and degree is conferred by the university.

It is the university, where, the facilitator is the college, where, the examination is being taken place and therefore, the word “conduct of examination”, cannot have such a narrow and pedantic interpretation. Throughout the regime between 2012 and 2017, the educational institution had been provided with the exemption as has been stated in various provisions of the Act as well as the mega notification, followed by the amended notification and during all these periods, these institutions including the universities can very well enjoy the exemption. Accordingly, the stand taken by the revenue for levying service tax for the services being provided by the petitioner university cannot be approved.

The contrary view taken by Advance Ruling Authority, Tamil Nadu in the case of M/S. BHARATHIYAR UNIVERSITY is also referred in the judgement as  " it is further to be noted that, the very Advance Ruling Authority in the said order in paragraph No.7.6. has also made it clear that, we do not part any opinion on the claim of the applicant that they extend such services to the institutions by extending the affiliation. Therefore, the said issue as claimed by the said university in the said ruling of the Advance Ruling Authority has not been answered and it has been kept open by stating the aforesaid that they do not want to express any opinion on such claim. Therefore, the claim made by the university on that aspect even though was indicated, the issue was kept open. In that context also, this Court feels that, no such pedantic or narrow view can be taken as that would destroy the very concept of providing exemptions to the services rendered by the educational institutions. The word “educational institution”, cannot denote only the college affiliated to the university, but, it includes the university. As stated above, without the university, college cannot impart education on its own."

Similar views held and citations are below: 

• MANONMANIAM SUNDARANAR UNIVERSITY VERSUS THE JOINT DIRECTOR (GST INTELLIGENCE) , COIMBATORE, THE JOINT COMMISSIONER, TIRUNELVELI., THE SENIOR INTELLIGENCE OFFICER, DIRECTOR GENERAL OF GOODS & SERVICE TAX INTELLIGENCE, MADURAI- 2021 at Madras High Court
• THE TAMIL NADU DR. MGR MEDICAL UNIVERSITY, THE REGISTRAR PERIYAR UNIVERSITY VERSUS THE PRINCIPAL ADDITIONAL DIRECTOR GENERAL DIRECTORATE GENERAL OF GOODS AND SERVICES TAX, PRINCIPAL COMMISSIONER OF CENTRAL TAX AND GST AND OTHERS- 2022 at Madras Hight Court

GST took the baton from the service tax regime for levying tax on educational services. Whereas during Service tax regime, operational definition of " Educational Services" was evolved over a period of time. Original Mega notification no 25/2012  issued in service tax regime had a mention of  " Auxiliary Educational services" which was later on omitted vide notification no 06/2014 , and replaced with existing clause (b) texts of serial no 66 of notification no 12/2017 what we follow in GST regime. Thus, we can always go back to understand as to what was in the framework.

Thus, affiliation fees collected by universities is indeed educational services should fall under item (iv) clause (b) of serial No. 66 of Notification No. 12/2017- Central Tax (Rate) dated 28th June, 2017 for exemption under GST.

- LDR

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The opinions, suggestions or thoughts expressed are that of the author of this article, please exercise adequate care in applying to your own scenario with appropriate technical advise as deem necessary.