The Bombay High Court has held that grant of affiliation by a statutory university under the Maharashtra Public Universities Act, 2016 is a statutory and regulatory function undertaken in discharge of public duties, and the affiliation fees collected for such function do not constitute “consideration” for a “supply” in the course or furtherance of “business” within the meaning of Section 7(1)(a) of the CGST Act; therefore, Section 9 is not attracted and GST cannot be levied on such affiliation fees.
The Court further held that, once Sections 7 and 9 are inapplicable, the proper officer lacks jurisdiction to issue a show cause notice under Section 74 of the CGST Act in respect of such affiliation fees, and any circular inconsistent with the substantive provisions of law cannot stand or be applied.
The Division Bench comprising Justice G. S. Kulkarni and Justice Aarti Sathe observed that Chapter X of the Maharashtra Public Universities Act, 2016 is a complete code regarding affiliation, and that the activities undertaken by the University for granting affiliation, including verification of infrastructure and other educational requirements, are within the statutory framework and not for profit or as any service provided under any business as understood in law.
The Bench observed that all such activities do not admit of any commercial concept and that the University’s role is a mission to disseminate education, where considerations of commerce are alien to the object and purpose of a statutory university founded under law. It held that the respondent’s reliance on the expression “furtherance of business” in Section 7(1)(a) was misplaced because the clause must be read as a whole in the context of supply of goods or services such as sale, transfer, barter, exchange, licence, rental, lease or disposal for consideration in the course or furtherance of business.
The Bench further held that the statutory activities of granting affiliation and collecting affiliation fees do not fall within Section 7(1)(a), and that even the definition of “business” under Section 2(17)(a) would not assist the respondents because it must be read ejusdem generis as involving activity for pecuniary benefit and incidental activities thereto. The University’s functions, being singularly and purely intended to further the object and intention of the statute, could not be categorized as trade, commerce, manufacture, profession, vocation, adventure or wager.
Accordingly, the Bench concluded that once the activity itself is not “supply” and is not business within the meaning of Section 7(1)(a), Section 9, being the charging provision, has no application, and consequently the proper officer had no jurisdiction to issue the show cause notice under Section 74 of the CGST Act. The insistence of the GST authorities to levy GST on affiliation fees was held to be lacking any basis under the GST laws.
Also, the Bench explained that grant of affiliation is a statutory and regulatory function intrinsically connected with imparting education, not a commercial activity, and that affiliation fees are statutory or regulatory in nature and not contractual. The Bench also observed that circulars or executive clarifications cannot override substantive statutory provisions or exemption notifications.
The Bench also noted that even assuming affiliation fees constituted a service, the exemption under Entry 66 of Notification No. 12/2017-CT (Rate) dated June 28, 2017, as interpreted in Goa University, would apply to the University as well, since services in relation to education provided by an educational institution to its students and specified services relating to admission or conduct of examination are exempt.
Briefly, the petitioner, a statutory university established under the Bombay University Act, 1953 and now governed by the Maharashtra Public Universities Act, 2016, challenged an order-in-original and summary order dated January 28, 2025 whereby GST demand of Rs. 16.90 crores along with interest and equivalent penalty was confirmed under Section 74(1) of the CGST Act, read with the corresponding provisions of the MGST Act and Section 20 of the IGST Act, on affiliation fees collected for FY 2017-18 to FY 2022-23.
The proceedings arose from a show cause notice dated July 18, 2024 in Form DRC-01 proposing levy of GST on “affiliation fees” collected by the petitioner. The petitioner replied on October 28, 2024 contending that grant and renewal of affiliation are statutory functions discharged under the Maharashtra Public Universities Act and that affiliation fees collected for such statutory duties are not liable to GST.
After hearing the petitioner, respondent no. 2 confirmed the demand, following which the petitioner sought rectification under Section 161 of the CGST Act on the ground that incorrect figures had earlier been furnished and revised figures with supporting documents were submitted. The rectification application was rejected on June 23, 2025 on the ground that the issues raised were on merits and were matters for appellate scrutiny rather than rectification.
The petitioner therefore contended that collection of affiliation fees by a statutory university is not a “supply” under Section 7 nor in the course or furtherance of “business” so as to attract Section 9 of the CGST/MGST Acts, and also challenged reliance on Circular No. 151/07/2021-GST and Circular No. 234/28/2024-GST. The respondents opposed the petition principally on the grounds of alternate remedy under Section 107 and on the footing that the activity amounted to supply for consideration in the course of business.
Appearances:
Senior Advocate V. Raghuraman, along with Advocates Raghvendra C.R, Sriraj Menon, Avesh Ganja, and Sandesh Panchal, for the Petitioner/ Taxpayer
Advocates Jitendra B. Mishra, Saket Ketkar, Ashutosh Mishra and Rupesh Dubey, for the Respondent nos. 1 to 5/ Revenue
Additional G.P. Jyoti Chavan, for the Respondent nos. 6 and 7/ State of Maharashtra
