Case Note & Summary
The dispute arose from notices issued by the Revenue under Section 74(5) of the Tamil Nadu Goods and Services Tax Act, 2017, proposing to levy GST on affiliation fees collected by the University from its affiliated colleges for the financial years 2019-2020, 2020-2021, 2021-2022 and 2022-2023. The University claimed exemption under Notification No.12/2017-CT (Rate) dated 28.06.2017, arguing that affiliation services are provided to educational institutions and relate to admission and conduct of examinations. The Revenue contended that affiliation is a separate taxable service and not covered by the exemption. The University filed writ petitions challenging the notices, and the matter was referred to a Division Bench by a Single Judge who noted conflicting decisions of coordinate benches on the same issue. The Division Bench examined the notification and earlier precedents. It held that the exemption under entry 66(a) of the notification applies only to services provided by an educational institution to its students, faculty and staff, and that the university’s affiliation service to colleges does not fall within this scope. The Court further reasoned that affiliation, though a prerequisite for colleges to admit students and conduct examinations, is not itself an activity of admission or examination. Affirming that the language of the exemption notification is unambiguous, the Court declined to adopt a purposive interpretation. It agreed with the views expressed by the Bombay High Court and the Telangana High Court, and distinguished the Karnataka High Court decisions. The Division Bench thus answered the reference by holding that affiliation charges collected by a university from affiliated institutions are amenable to levy of GST and not exempt under the notification. The writ petitions stood dismissed.
Headnote
A) Goods and Services Tax - Exemption for Educational Institutions - Scope of Entry 66(a) of Exemption Notification No.12/2017-CT (Rate) - Central Goods and Services Tax Act, 2017 - The exemption for services provided by an educational institution to its students, faculty and staff does not cover affiliation services provided by a university to its affiliated colleges. Held that affiliation fees are not exempt from GST. (Paras 6, 8.1) B) Goods and Services Tax - Definition of Service - Section 2(102) of Tamil Nadu Goods and Services Tax Act, 2017 - Affiliation as a service is distinct from admission or examination; it is a pre-condition but not part of the educational services exempted. The Court held that the service of granting affiliation is not part of admission or conduct of examination. (Paras 8.1, 8.2) C) Interpretation of Tax Exemptions - Purposive Interpretation Not Applicable - Unambiguous taxing statute cannot be interpreted broadly to grant exemption - Notification No.12/2017-CT (Rate) - Following the views in Pondicherry University and Sree Ramu College, the Division Bench rejected the purposive interpretation adopted in Madurai Kamaraj University case, holding that the notification is unambiguous and exemption cannot be extended beyond its terms. (Paras 4.2, 5.1, 5.2) D) Indirect Tax - Circulars and Clarifications - Circular cannot override statutory notification but can clarify - Central Goods and Services Tax Act, 2017 - The Court noted that while a circular cannot restrict the scope of an exemption notification, the impugned circular clarifying that affiliation services are taxable was valid, as the notification itself did not exempt such services. (Paras 6, 7)
Issue of Consideration
Whether affiliation charges collected by an University from the affiliating Institution is amenable to levy of GST ?
Final Decision
The Division Bench answered the reference by holding that affiliation services are not exempt from GST under Notification No.12/2017-CT (Rate). The court held that the exemption for educational institutions does not extend to affiliation services provided by the university to its affiliated colleges, as affiliation is a distinct service and not part of admission or examination. The writ petitions stood dismissed.
Law Points
- affiliation fees not exempt under Notification No.12/2017-CT (Rate)
- services relating to admission or conduct of examination do not include affiliation
- definition of service under Section 2(102) of TNGST Act
- purposive interpretation not permissible when notification is unambiguous
- exemption notification must be strictly construed
- circulars cannot whittle down statutory exemption but if exemption is clear then circulars are irrelevant
