University Affiliation Fees Not Taxable as Supply, High Court Rules

The petitioner, the University of Mumbai, a statutory university established under state legislation, was issued a show cause notice under Section 74 of the CGST Act proposing GST on “affiliation fees” collected from colleges for the period 2017–18 to 2022–23. The department treated such fees as consideration for supply of services and confirmed a demand of Rs. 16.90 crore along with interest and penalty.

The university contended that granting affiliation is a statutory obligation under the Maharashtra Public Universities Act, 2016, forming part of its core educational functions. It argued that such activity is neither a commercial service nor a “supply” under GST law. A rectification application was also rejected, prompting the present writ petition challenging both the demand and related circulars.

Issue Before Court: Whether affiliation fees collected by a statutory university qualify as “supply” and “consideration” taxable under Sections 7 and 9 of the CGST Act?

HC’s Decision: The Bombay High Court allowed the petition and quashed the GST demand. It held that affiliation granted by a university is a statutory and regulatory function aimed at maintaining educational standards and cannot be equated with business or commercial activity. The Court observed that for GST to apply, there must be a “supply” made in the course or furtherance of business. In the present case, the university’s role in granting affiliation is rooted in statutory duties, with no element of trade, commerce, or quid pro quo. The affiliation fee is a regulatory levy, not consideration for a service.

It further held that once the activity itself does not qualify as “supply”, the charging provision under Section 9 cannot be invoked, and the GST authorities lack jurisdiction to raise such a demand. The court relied on consistent judicial precedent, including decisions of the Karnataka High Court and Rajasthan High Court, holding that affiliation fees are not taxable under GST. It also noted that imposing GST would indirectly burden students, which is contrary to the scheme of education-related exemptions. Therefore, the impugned order in the original and the rectification order were set aside.

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