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

In Re: M/s. University of Calicut

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 - activities or services being provided by the University to its affiliated colleges and students - services rendered by a Government authority by way of any activity in relation to the functions entrusted to a Panchayat and Municipality - exemption under Entries 4 and 5 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and SRO 371/2017 dated 30.07.2017. Whether the services provided by the applicant to its affiliated colleges and students constitute a supply within the meaning and scope of “supply” as defined in Section 7 of the CGST Act, 2017? - HELD THAT:- The definition of “business” under the GST Act is an inclusive definition and is so wide in its scope and amplitude that it not only covers all activities or transactions that were subjected to various taxes that were subsumed in GST but also functions undertaken by Central Government, State Government or Local Authority as such public authority. In the case of DAYAL SINGH & ORS. VERSUS U.O.I. & ORS. [2003 (1) TMI 712 - SUPREME COURT], the Hon'ble Supreme Court held that; “where the language of the statute is clear and unambiguous, nothing can be read into it by implication and the intention of the legislature has to be gathered from the language used.” In view of the plain and unambiguous definition of the term “business” in the CGST Act there is no need for recourse to construction or interpretation and the plain meaning of the statue has to be applied - Therefore, the services provided by the applicant to its affiliated colleges are covered by the definition of “business” in the CGST Act and consequently constitute a supply within the meaning and scope of “supply” as defined in Section 7 of the CGST Act, 2017. Whether the supply is exempted under the entry at SI Nos. 4 and 5 of the Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017? - HELD THAT:- The entry Nos. 17, 18 and 19 of Eleventh Schedule of the Constitution covers all types of education and education is also covered under entry No. 13 of the Twelfth Schedule of the Constitution. Therefore, education is a function entrusted to both Panchayath as well as Municipality under Article 243G and 243W respectively of the Constitution. University is a key institution of social change and development and the applicant being a Public University established under The Calicut University Act, 1975 an Act passed by the Legislature of the State of Kerala falls under the definition of “Governmental authority” in Para 2 (zf) of Notification No. 12/2017 CT (Rate) dated 28.06.2017. Therefore, the services provided by the applicant to its affiliated colleges are services by “Governmental authority” by way of activity in relation to function entrusted to a Panchayath and Municipality under Article 243G and 243 W of the Constitution and accordingly exempted from payment of GST as per entries at Si Nos. 4 and 5 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017. 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.