Mumbai University Faces Rs. 17 Crore Demand on pending GST on affiliation fees

The University of Mumbai (MU) has been served a notice by the Central Goods and Services Tax (CGST) department to pay about Rs. 16.9 crore as outstanding GST dues in terms of affiliation fees since 2017. Some other public universities in Maharashtra have reportedly been served similar notices, all asking for retrospective GST on the affiliation fees charged over the years.

This development comes on the heels of a landmark ruling by the Goa bench of the Bombay High Court, which recently quashed the CGST department’s move to charge GST on Goa University. The court held that education institutions are non-commercial and their ancillary services cannot be classified as business activities unless an independent intent to do business is found.

Following the CGST notice, MU and other universities involved have moved to the GST commissioner, requesting exemption from paying the tax. Besides, representations have also been made with the state government to step in and grant relief. On Friday, a meeting was conducted among vice-chancellors of the affected institutions and the state education minister to debate the matter in detail. In the discussion, a guarantee was made that the issue would be taken up with central authorities for its settlement.

MU, which has over 850 affiliated colleges under its belt, relies considerably on affiliation fees as one of its prime sources of income. The money is usually used for student welfare activities. Even though the university has not yet made a public statement regarding the issue, internal sources indicated that it is getting ready to challenge the GST claim. An appeal is likely to be made before the Commissioner of Central GST and Central Excise, claiming that the university, being a public body, must exempted from paying GST on such fees.

Meanwhile, academic stakeholders are increasingly worrying about the effect of GST on the education sector. A recent court ruling in favour of Goa University stressed that the CGST department’s effort to tax some educational activities—like the sale of prospectuses, old newspapers, and charging fees for admissions, sports, and certificates—was not justifiable legally. The court ruled that these services were an essential part of the university’s core activity of education and did not amount to business as understood under section 2(17) of the CGST Act, 2017.

The Goa High Court ruling stated that Goa University, being established by state law, did not qualify as a government or local authority and nor did its functions come under business activities attracting GST liability under clause 2(17)(i) of the CGST Act. The court held that all educational activities performed by such institutions, including charges of different types of fees, are exempt from GST.

As Mumbai University and other universities get ready to fight the retrospective tax demands, the case is likely to throw up larger debates about the categorization of education services under India’s indirect tax regime.