The Karnataka High Court (Bengaluru Bench) has reiterated that since the activities of the Universities are not commercial in nature and cannot be termed as ‘supply’ in the course or furtherance of business, those activities which are incidental to education cannot be brought to tax under the GST regime on the ground that it amounts to a business.
On the aspect of the nature of activities carried out by a university, a reference was made to the decision in the case of Goa University v. Joint Commissioner of Central Goods and Service Tax [W.P.No.723/2024], wherein it was held that “GST is a value-added tax which applies to ‘all commercial activities’ involving production of goods and provisions of services. GST is a destination-based consumption tax as it is borne by the consumer/end user in the supply chain”.
Reference was also made to the decision in the case of M/s. Bengaluru North University vs. Joint Commissioner of Central Tax [W.P.No.4254/2024], where it was held that “the term ‘business’ is defined in Section 2(17) of the CGST Act to include trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; it is clear that education per se cannot fit into the above terminology of trade, commerce, manufacture, profession, adventure, wager or any other similar activity”.
A single Judge Bench of Justice M. Nagaprasanna observed that the word “consideration” would necessarily have to draw colour and meaning from Section 2(31) of the CGST Act and which speaks of payment made in respect of, in response to, or for the inducement of a supply of goods. More importantly, by virtue of Section 7, a supply would necessarily have to be of goods or services not only for consideration but in the course or furtherance of businesses.
The Single Judge added that the regulatory function discharged by the Commission would clearly not fall within the scope of the word “business” as defined by Section 2(17), and therefore, even if the fee so received by such Commissions were to be assumed as being consideration received, it was clearly not one obtained in the course or furtherance of business.
The Single Judge also reiterated that the services provided by the Universities are exempt from GST in terms of Entry No. 66 of Notification No. 12/2017-CT (R) dated June 28, 2017, and the affiliation fees, admissions fees, convocation fees, and other sums collected by the petitioners-Universities from the College/students would not be liable to payment of GST.
The Bench therefore quashed the show cause notices and the order issued by the GST Department on the petitioner university, thereby levying GST on the affiliation fees, PG registration fees, admissions fees, convocation fees, and other sums collected by the university from the College/students.
Case Relied On:
M/s. Bengaluru North University vs. Joint Commissioner of Central Tax – W.P.No.4254/2024
Appearances:
Advocate Rajendra Kumar Sungay T.P., for the Petitioner/ Taxpayer
Advocate K. Hema Kumar, for the Respondent/ Revenue
