University affiliation fees are not taxable supply and fall within the educational services exemption under GST.

A university's grant of affiliation was held to be a statutory educational and regulatory function, not an activity in the course or furtherance of business, so it did not amount to a supply of service under the CGST Act. The affiliation fee was treated as a compulsory statutory levy lacking bargaining, reciprocity or quid pro quo, and therefore not consideration for a taxable supply. Affiliation was also held to fall within Entry 66 of Notification No. 12/2017-Central Tax (Rate) as services relating to admission, examinations and degrees, so GST on affiliation fees lacked legal authority and was invalid.

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Issues: (i) Whether grant of affiliation by a university constitutes a supply of service under the CGST Act, 2017; (ii) Whether affiliation fees constitute consideration for such supply; (iii) Whether affiliation services are exempt under Entry 66 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017; (iv) Whether levy of GST on affiliation fees is legally sustainable.

Issue (i): Whether grant of affiliation by a university constitutes a supply of service under the CGST Act, 2017

Analysis: Affiliation was held to be a statutory and regulatory function integral to admission of students, conduct of examinations and conferment of degrees. Since the activity was not in the course or furtherance of business, it did not answer the statutory test of supply under Section 7, and the university's functions could not be equated with trade, commerce or any commercial activity.

Conclusion: Grant of affiliation does not constitute a supply of service.

Issue (ii): Whether affiliation fees constitute consideration for such supply

Analysis: The fee was treated as a compulsory statutory levy linked to discharge of public and academic functions, without bargaining, reciprocity or quid pro quo. In the absence of a contractual or commercial element, the statutory collection could not be characterised as consideration.

Conclusion: Affiliation fees do not constitute consideration.

Issue (iii): Whether affiliation services are exempt under Entry 66 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017

Analysis: Entry 66 was construed purposively and harmoniously, in light of the wide expression "relating to" and the educational character of the university's functions. Affiliation was held to be inseparably connected with admission, examinations and the award of degrees, and therefore covered by the exemption framework for educational services.

Conclusion: Affiliation services fall within Entry 66 and are exempt.

Issue (iv): Whether levy of GST on affiliation fees is legally sustainable

Analysis: Executive circulars and clarifications could not override the statute or the exemption notification. Since the underlying activity was not a taxable supply and, even otherwise, was exempt, the levy lacked authority of law.

Conclusion: Levy of GST on affiliation fees is not legally sustainable.

Final Conclusion: The university's collection of affiliation fee was held to be outside the taxable net, the impugned show cause notice was quashed, and the challenged GST levy on affiliation fees was invalidated.

Ratio Decidendi: A university's grant of affiliation, being a statutory educational and regulatory function without commercial character or quid pro quo, is neither a taxable supply nor taxable consideration, and in any event falls within the exemption for services integrally relating to admission and examinations under Entry 66.

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