2020 (12) TMI 793 - AAR - GST

University's Affiliation Services Not Exempt: Impact on Composite Supply

The court ruled that the composite supply of services provided by the University to its constituent colleges, including affiliation services, is not ... Exemption under Notification No.12/2017-C.T.(Rate) (SI. No.66) - services relating to admission to, or conduct of examination by, an educational institution - composite supply and principal supply - definition and scope of affiliation under UGC/University regulations - interpretation of amendment by Notification No.2/2018-C.T.(Rate) dated 25.01.2018Exemption under Notification No.12/2017-C.T.(Rate) (SI. No.66) - services relating to admission to, or conduct of examination by, an educational institution - composite supply and principal supply - definition and scope of affiliation under UGC/University regulations - Whether the fees charged by the University from affiliated colleges for application, registration, inspection, affiliation (including initial, permanent, continuation, increase in intake and penal fees) are exempt under SI. No.66 of Notification No.12/2017-C.T.(Rate) as services relating to admission to, or conduct of examination by, such institution. - HELD THAT: - The Authority found that the various fees (application form, application/registration, inspection, affiliation and related fees, increase in intake processing fee, and penal late application fee) are supplies that are naturally bundled and, in the ordinary course, form a composite supply with the grant of affiliation as the principal supply. The amendment effected by Notification No.2/2018 expanded the exemption at SI. No.66(b)(iv) to cover services relating to admission to, or conduct of examination by, educational institutions generally (removal of the words 'upto higher secondary'). Examination of the Fitment Committee's recommendation and the terms of the notification shows the exemption targets services provided to educational institutions that are in relation to admission of students or the conduct of entrance examination for admission. The Authority, applying the regulatory definition of affiliation and the UGC/University regulations, held that affiliation is a regulatory/recognition function to enable an institution to be eligible to run programmes and does not itself constitute a service relating to admission of students or conduct of entrance examinations for admission. Consequently, services whose object and effect are to evaluate, recognise or permit an institution or course (inspection, grant/continuation/permanent affiliation, processing for increase in intake, and consequential fees) do not fall within the scope of services 'relating to admission to, or conduct of examination by, such institution' as exempted by SI. No.66. The Authority therefore concluded that the claimed exemption does not extend to the composite supply at hand.The composite supply comprising application, registration, inspection and various affiliation-related fees with affiliation as the principal supply is not exempt under SI. No.66 of Notification No.12/2017-C.T.(Rate) as amended by Notification No.2/2018-C.T.(Rate).Final Conclusion: The Authority rules that the fees charged by Bharathiar University from its constituent/self-financing and management colleges for application, registration, inspection, affiliation (initial, permanent, continuation, additional sections, increase in intake) and penal late application are not covered by the exemption at SI. No.66 of Notification No.12/2017-C.T.(Rate) (as amended) because such affiliation-related services do not constitute services relating to admission of students or conduct of entrance examinations for admission. Issues Involved:1. Whether the services provided by the University to its constituent colleges relating to admission to, or conduct of examination by such institution by way of various fees are exempted under Sl.No. 66 of Notification No. 12/2017 CT(Rate) dated 28.06.2017.Detailed Analysis:1. Nature of Services and Fees:The applicant, a University, collects various fees from affiliated colleges, including application form fees, application fees, inspection fees, affiliation fees, initial and permanent affiliation fees, continuation of affiliation fees, fees for increasing intake, and penal fees for late applications. The applicant argues that these services are related to the admission of students and the conduct of examinations, thus should be exempt under Sl.No. 66 of Notification No. 12/2017-CT(Rate).2. Composite Supply:The applicant contends that 'affiliation' is the principal supply, and other activities like application, registration, inspection, etc., are naturally bundled with it. Section 2(30) of the GST Act defines 'composite supply' as a supply consisting of two or more taxable supplies naturally bundled and supplied in conjunction with each other, one of which is a principal supply. The authority agrees that the entire gamut of activities for which the fees are collected is a composite supply with 'affiliation' being the principal supply.3. Exemption Analysis:The exemption under Sl.No. 66 of Notification No. 12/2017-CT(Rate) as amended by Notification No. 02/2018-C.T.(Rate) dated 25.01.2018, exempts services provided to an educational institution by way of services relating to admission to, or conduct of examination by, such institution. The applicant claims that their services fall under this exemption since affiliation is essential for admission and examination.4. Fitment Committee and GST Council's Intent:The Fitment Committee's recommendation, accepted by the GST Council, aimed to exempt services relating to admission to or conduct of examination for admission to all educational institutions. The amendment was to extend the exemption to higher educational institutions, which were not exempted earlier. The authority interprets this to mean that the exemption applies to services directly related to admission or conduct of entrance examinations, not to affiliation services.5. Affiliation Services:Affiliation involves recognizing a college to be eligible for the privileges of a university, ensuring the institution meets required standards. The authority concludes that affiliation services do not directly relate to the admission of students or the conduct of examinations for admission. Hence, these services are not covered under the exemption provided in Sl.No. 66 of Notification No. 12/2017-CT(Rate).Ruling:The composite supply of sale of application, registration of course, inspection, etc., with the principal supply of 'affiliation' provided by the University to its constituent colleges is not exempted under Sl.No. 66 of Notification No. 12/2017-CT(Rate) dated 28th June 2017 as amended by Notification No. 02/2018-C.T.(Rate) dated 25.01.2018.