GST on University Affiliation Fees is Illegal and Unsustainable: Rajasthan High Court

Regulatory Functions Exempt from GST: Rajasthan High Court Grants Relief to Educational Institutions

In a potentially landmark ruling for educational institutions across the state, the Rajasthan High Court has held that the collection of GST on affiliation fees charged by a university is not sustainable under the Central Goods and Services Tax (CGST) Act. The bench, led by Justice Arun Monga and Justice Sunil Beniwal, determined that granting affiliation is a core statutory and regulatory function, not a commercial "supply of service."

The Dispute: Affiliation as a Service Subject to Tax?

The petitioner, Surendera Dental College and Research Institute , challenged the imposition of GST on affiliation fees paid to the Rajasthan University of Health Science . The crux of the legal challenge was whether the mandatory process of affiliation—required for colleges to offer degrees—constitutes a taxable service under federal law.

The petitioner argued that their case was squarely covered by the precedent set in Rajasthan Technical University v. Union of India (2026), where the court previously struck down similar tax demands.

Legal Analysis: The Threshold of Statutory Duties

The Court’s reasoning hinged on the distinction between commercial supply and statutory obligation. Referencing the principles laid down in its earlier judgment, the Court emphasized that:

• Statutory Nature: Affiliation is a regulatory requirement enabling an institution to prepare students for examinations, not a commercial service for profit.
• Discriminatory Treatment: The Court questioned why universities are treated differently from Central and State Educational Boards (such as the CBSE), noting that such a distinction is "manifestly arbitrary and ex facie discriminatory."
• Exemption under Entry 66: The Court definitively ruled that affiliation activities fall within the scope of exempt services under Entry 66 of Notification No. 12/2017-CT (Rate).

Key Observations

The judgment offers a firm rebuke to the inclusion of affiliation fees within the GST ambit:

> "It is held that grant of affiliation by a University is a statutory and regulatory function and does not constitute a supply of service under the CGST Act. Affiliation fees are not consideration for any taxable activity."

> "Any attempt to deny universities similar treatment at par with Central and State Educational Boards is manifestly arbitrary and ex facie discriminatory."

> "Consequently, aside all above, for this reason too, the so-called service of affiliation rendered by a university to its affiliated colleges squarely falls within the ambit of exempt services under Entry 66(a) as well as Entry 66(b)(iv)."

The Road Ahead: Implications for Institutions

The High Court has issued a formal notice to the respondents. While the Rajasthan University of Health Science is currently seeking instructions regarding the court’s order, the judgment provides a clear template for future cases.

Pending the next hearing on May 11, 2026, the case sets a clear expectation: unless a university can demonstrate that their affiliation fee is somehow disconnected from their statutory duty to educate, the taxman will be unable to levy GST on such payments. Moreover, the Court has already ordered that where the burden of GST has not been passed on to students, any previously paid fees must be refunded within four months, or face an interest penalty of 7% per annum.

This ruling serves as a significant safeguard for the higher education sector, ensuring that the cost of regulatory compliance remains outside the reach of federal indirect tax levies.