GST on RCM basis on Statutory Levies

The Rajasthan Technical University case Rajasthan Technical University, Kota Versus Union of India, Through The Revenue Secretary, Ministry of Finance, New Delhi, Commissioner, Office of The Commissioner, Central Excise And Central Goods And Services Tax Commissionerate, Udaipur, Deputy Commissioner, Office Of The Commissioner, Central Excise And Central Goods And Services Tax Commissionerate (Anti - Evasion Branch), Udaipur, Rajasthan, Superintendent, Central Excise And Central Goods And Services Tax Commissionerate (Anti - Evasion Branch), Udaipur, Assistant Commissioner, Office Of The Assistant Commissioner, Central Excise And Central Goods And Services Tax, (Anti - Evasion Branch, Kota), State Of Rajasthan, The Commissioner, Rajasthan Goods And Services Tax, Rajasthan. - 2026 (4) TMI 1641 - RAJASTHAN HIGH COURT against the Union of India provides a some relief on the applicability of GST to statutory levies. At the heart of the dispute was whether affiliation fees charged by a university to colleges could be treated as 'consideration' for a supply of service under Section 7 of the CGST Act. The court examined the statutory framework closely, noting that Section 7(1)(a) requires a supply to be made in the course or furtherance of business, while Section 7(1)(aa) requires that such supply be for consideration. Affiliation, however, is not a commercial activity but a statutory requirement - colleges must obtain affiliation to admit students, conduct examinations, and confer degrees. This makes affiliation an essential regulatory function rather than a business transaction. The judgment emphasized that affiliation fees are compulsory statutory levies, not payments in exchange for a service. Since the definition of 'business' under Section 2(17) of the CGST Act excludes such statutory functions, the court held that these fees cannot be treated as consideration. Furthermore, the affiliation process is integrally linked to education, admissions, and examinations, which are exempt under Entry 66 of Notification No. 12/2017-CT (Rate). The court also reinforced the principle that circulars or executive clarifications cannot override statutory provisions or exemption notifications, thereby safeguarding the primacy of law over administrative directions. It must be noted that Circular No. 234/28/2024-GST held that affiliation Fee Taxable 2. Applicability of GST on the service of affiliation provided by universities to colleges: 2.3 Thus, as recommended by the 54th GST Council, it is hereby clarified that the affiliation services provided by universities to their constituent colleges are not covered within the ambit of exemptions provided to educational institutions in the notification No. 12/2017- CT(R) dated 28.06.2017 and GST at the rate of 18% is applicable on the affiliation services provided by the universities. 3. Applicability of GST on the service of affiliation provided by Central and State educational boards or Councils, or other similar bodies, to schools: 3.4 In its 54th meeting, the GST Council further recommended regularizing the GST liability on such services provided to all schools for the period from 01.07.2017 to 17.06.2021, i.e., the date of issuance of Circular No. 151/07/2021-GST wherein accreditation services of boards are clarified to be taxable at the rate of 18%. 3.5 Therefore, as recommended by the GST Council, it is clarified that services of affiliation, provided to schools by Central or State educational boards or councils, or other similar bodies, by whatever name called, are taxable. Further, as recommended by the Council, the payment of GST on the services of affiliation provided by Central and State educational boards or Councils, or other similar bodies, to all schools is regularized on 'as is where is' basis for the period from 01.07.2017 to 17.06.2021. This ruling however, draws a line between statutory levies imposed under law and payments made for commercial services. However the issue has not reached finality as The Hon'ble Madras High Court has held the opposite in the case of Bharathidasan University, Rep. By its Registrar, Palkalaiperur Versus The Joint Commissioner of GST (ST-Intelligence) Trichy Division, Tiruchirappali, The State Tax Officer, Tiruchirapalli - 2026 (2) TMI 722 - MADRAS HIGH COURT. It held as under: As per the definition of 'service' under the GST Act and the exemption notification No.12/2017-CT(Rate), the exemption is restricted to services relating to admission of students and conduct of examinations by educational institutions, and does not cover services for affiliation of colleges. The Circular No. 234/28/2024 GST-dated 11.10.2024 stated that the activity of affiliation by educational boards or councils is not a service related to admission of students or conduct of examinations, and hence is liable to GST. Thus, it is clear that the fees collected for affiliation and for inspection of colleges applied for affiliation, fall beyond the scope of service connected with admission of students and conduct of examination. The extended meaning cannot be given to the expression 'services relating to admission or conduct of examination' to cover the affiliation fees collected by the University. The affiliation process is independent of the admission of students and conduct of examinations