2023 (7) TMI 809 - AAR - GST

Public university services to affiliated colleges constitute supply under Section 7 CGST Act but exempt under Notification 12/2017

AAR Kerala ruled that services provided by a public university to affiliated colleges and students constitute supply under Section 7 of CGST Act, 2017, as ... Scope of supply - supply - business (inclusive definition) - Governmental authority - services by a Governmental Authority in relation to functions entrusted to a Panchayat - services by a Governmental Authority in relation to functions entrusted to a Municipality - exemption under Notification No. 12/2017 - entries 4 and 5 - Article 243G - Article 243WScope of supply - supply - business (inclusive definition) - Whether the services provided by the University to its affiliated colleges and students constitute a supply within the meaning of Section 7 of the CGST Act, 2017. - HELD THAT: - The Authority examined the statutory definition of 'supply' in Section 7 and the inclusive definition of 'business' in Section 2(17) of the CGST Act. Having regard to the statutory language, the Authority held that the definition of 'business' under the GST law is wide enough to cover activities undertaken by non individual entities to their members or constituents and other transactions described in Section 7(1) and (1A). The Authority rejected the contention that educational activities of a public university cannot amount to 'business' for GST purposes, observing that prior judicial observations in other statutory contexts cannot override the clear and unambiguous legislative definition in the CGST Act. Applying these principles to the facts, the services rendered by the applicant - including affiliation, examinations, registrations, verification of admissions, valuation and issuance of marks lists - fall within the statutory scope of 'supply' under Section 7. [Paras 7]The services provided by the applicant to its affiliated colleges constitute a supply within the meaning and scope of 'supply' as defined in Section 7 of the CGST Act, 2017.Governmental authority - services by a Governmental Authority in relation to functions entrusted to a Panchayat - services by a Governmental Authority in relation to functions entrusted to a Municipality - exemption under Notification No. 12/2017 - entries 4 and 5 - Article 243G - Article 243W - Whether the supply of services by the University is exempt under entries 4 and 5 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 as services by a Governmental Authority in relation to functions entrusted to a Panchayat and Municipality. - HELD THAT: - The Authority considered the definition of 'Governmental Authority' in the notification and the scope of functions listed under Articles 243G and 243W and their respective Schedules. Education appears in the Eleventh Schedule (entries covering all types of education) and in the Twelfth Schedule (promotion of educational aspects), thereby establishing that education is a function entrusted to Panchayats and Municipalities. The applicant is a public university established by a State Legislature and, on the material before the Authority, falls within the notification's definition of a 'Governmental Authority.' Consequently, the services supplied by the applicant to its affiliated colleges are services by a Governmental Authority by way of any activity in relation to functions entrusted to Panchayats and Municipalities and therefore attract the exemption provided at SI Nos. 4 and 5 of Notification No. 12/2017 (Central Tax) (Rate). [Paras 7]The services provided by the applicant to its affiliated colleges are exempt from payment of GST under SI Nos. 4 and 5 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017.Final Conclusion: The Authority ruled that the University's services to its affiliated colleges constitute a 'supply' under Section 7 of the CGST Act, 2017, but such supplies are exempt from GST under SI Nos. 4 and 5 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 as services by a 'Governmental Authority' in relation to functions entrusted to Panchayats and Municipalities. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions addressed in the judgment are:Whether the activities or services provided by the University to its affiliated colleges and students fall under the 'Scope of Supply' as defined in the Central Goods and Services Tax Act, 2017 (CGST Act), and are thereby subject to Goods and Services Tax (GST).If the services are considered to fall under the 'Scope of Supply,' whether they are exempt under Entries 4 and 5 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, which pertains to services rendered by a Government authority in relation to functions entrusted to a Panchayat and Municipality.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Scope of SupplyRelevant legal framework and precedents: The definition of 'supply' under Section 7 of the CGST Act includes all forms of supply of goods or services made for a consideration in the course or furtherance of business. The term 'business' is defined broadly in Section 2(17) of the CGST Act.Court's interpretation and reasoning: The court examined whether the services provided by the University constitute a 'supply' under Section 7. The applicant argued that their activities are educational and not in furtherance of business. However, the court noted that the definition of 'business' under the CGST Act is inclusive and broad, covering activities by public authorities.Key evidence and findings: The University provides various services to affiliated colleges, such as conducting examinations and issuing marks lists, which involve fees. The court found these activities fall within the definition of 'supply' as they are in furtherance of business under the GST framework.Application of law to facts: The court applied the inclusive definition of 'business' and determined that the services provided by the University to its affiliated colleges are indeed a 'supply' under the CGST Act.Treatment of competing arguments: The applicant's reliance on case law suggesting educational activities are not business was dismissed. The court emphasized the specific language of the GST Act, which includes activities by public authorities.Conclusions: The court concluded that the services provided by the University to its affiliated colleges constitute a 'supply' under Section 7 of the CGST Act.Issue 2: Exemption under Notification No. 12/2017Relevant legal framework and precedents: Entries 4 and 5 of Notification No. 12/2017 exempt services by a Governmental Authority related to functions entrusted to a Panchayat or Municipality under Articles 243G and 243W of the Constitution.Court's interpretation and reasoning: The court analyzed whether the University qualifies as a 'Governmental Authority' and whether its services relate to functions under the specified constitutional articles.Key evidence and findings: The University is established under a state act, with more than 90% control by the government, qualifying it as a 'Governmental Authority.' Education is a function listed under both the Eleventh and Twelfth Schedules of the Constitution, relevant to Panchayats and Municipalities.Application of law to facts: The court found that the University's services to affiliated colleges are activities related to educational functions entrusted to local bodies, thus qualifying for the exemption.Treatment of competing arguments: The court considered the applicant's submissions and relevant constitutional provisions, determining that the exemption applies.Conclusions: The court concluded that the services provided by the University are exempt from GST under the specified notification entries.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'The services provided by the applicant to its affiliated colleges constitute a supply within the meaning and scope of 'supply' as defined in Section 7 of the CGST Act, 2017.'Core principles established: The judgment clarifies that educational services provided by a statutory university can constitute a 'supply' under the GST Act, but may also qualify for exemptions if they fulfill the criteria of being governmental functions.Final determinations on each issue: The court ruled that the University's services are a 'supply' under the CGST Act but are exempt from GST under Notification No. 12/2017 due to their nature as governmental functions related to education.