Recently Hon'ble Telangana High Court in the case of Care College of Nursing and others has held that GST is payable on Inspection and Affiliation Fee charged by the Universities from Colleges and No Exemption is available under GST for them. (Copy of Order is attached in the end of the Article).
Brief Facts of the Case
The colleges which intend to get affiliation the Kaloji Narayana Rao University of Health Sciences are required to undergo certain procedure. For the purpose of granting affiliation, the University is required to first conduct an inspection and for this purpose, the University charges inspection fees as also affiliation fees from the respective colleges.
Main Question of Law
Whether the the service provided by the Universities to Colleges in the form of inspection and affiliation is exempt under N.No. 12/2017 as amended.
Legal Text of Exemption Notification (S.No. 66 of N.No. 12/2017) as amended
Services provided –
(a) by an educational institution to its students, faculty and staff;
(aa) by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee.
(b) to an educational institution, by way of –
(i) transportation of students, faculty and staff;
(ii) catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory;
(iii) security or cleaning or house-keeping services performed in such educational institution; (iv) services relating to admission to, or conduct of examination by, such institution; up to higher secondary;
Provided that nothing contained in entry (b) shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent.
Key Points Considered by the Hon'ble HC while deciding the Case (Based on our Interpretation)
The Notification No.11 of 2017, dated 28.06.2017, emphatically holds education service to be one which is liable to tax as:
Sl. No. | Chapter, Section or Heading | Description of Service | Rate (per cent) | Condition |
... | ​ | ​ | ​ | ​ |
30 | Heading 9992 | Education services | 9 | ​ |
The relaxations granted vide Notification No.12 of 2017 is confined to the services rendered by the educational institutions to the students, faculty and staff. It also grants exemption in respect of collection of fees relating to entrance examination and other fees chargeable from the students for admission or any such purpose.
Nowhere has the Government declared or notified that charging of inspection fees and the affiliation fees by the University also would fall within the exempted category.
Under the taxing law, unless there is a specific exemption granted specifically on inspection fees and affiliation fees, the petitioners cannot be permitted to claim exemption drawing an inference of the affiliation and inspection fees both being part of the Notification No.12 of 2017, dated 28.06.2017, and also being inter-linked to the curriculum which is undertaken by the educational institutions and the admissions derived therefrom.
Further, Para 4(iii) of the Circular No. 151/07/2021-GST has also clarified that:
(iii) G.S.T. at the rate of 18% applies to other services provided by such Boards, namely of providing accreditation to an institution or to a professional (accreditation fee or registration fee such as fee for FMGE screening test) so as to authorize them to provide their respective services.
A plain reading of the said Clause (4) would give a clear indication that, except for the exemption that has been specifically enumerated in Notification No.12 of 2017, dated 28.06.2017, all other services rendered by educational institutions and universities are taxable under the G.S.T. law.
Another fact which needs to be considered is that under the Notification No.11 of 2017, dated 28.06.2017, (as has been discussed earlier), the entire ‘education service’ itself is held to be taxable under G.S.T. law, and if the Government intended to exempt the educational institutions and universities from the ambit of G.S.T. law, they would have simply, as in Notification No.11 of 2017, incorporated ‘education service’ and would have exempted the petitioners and the universities as well. However, that is not the case.
Various Hon'ble Supreme Court Judgements have also clarified that :
A person claiming exemption, therefore, has to establish that his case squarely falls within the exemption notification, and while doing so, a notification should be construed against the subject (i.e. taxpayer) in case of ambiguity.
Accordingly, it was decided that GST is leviable on affiliation fee and inspection fee charged by the University from the Colleges.
Copy of the Order
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Disclaimer: We have tried to simplify the Hon’ble Court Decision based on our understanding purely for academic purpose. In case, there is any mistake in understanding of the order, we are apologised to the Hon’ble Court.