Bombay High Court at Goa Quashes GST Demand on Goa University, Holds Affiliation Fees Not Taxable

Goa, India - The High Court of Bombay at Goa has delivered a significant judgment, quashing a Show Cause Notice and a subsequent Order-in-Original issued by the Goods and Services Tax (GST) authorities demanding tax on the educational activities, including affiliation fees, of Goa University. The Court held that the activities of the statutory university are not commercial in nature and thus do not constitute 'business' or 'supply' under the Central Goods and Services Tax Act, 2017 (CGST Act).

The bench of Justices M. S. Karnik and Nivedita P. Mehta pronounced the judgment on April 15, 2025, finding a complete absence of jurisdictional facts required to levy GST on the university's core activities.

Background of the Case

Goa University, established under the Goa University Act, 1984, filed a writ petition challenging a show cause notice dated August 5, 2024, from the Joint Commissioner of CGST, Goa, proposing GST on its educational activities. During the petition's pendency, the Joint Commissioner passed an Order-in-Original on January 28, 2025, under Section 74 of the CGST Act, which the university also challenged through an amendment to the petition.

The University also challenged the validity of two circulars issued by the Central Board of Indirect Taxes and Customs (CBIC) dated February 17, 2021, and October 11, 2021, and a Press Note dated September 9, 2024, all of which implied or clarified that affiliation/accreditation services provided by educational boards/universities are subject to GST.

Previously, a service tax demand on affiliation fees to the university had been dropped in 2019 by the Central GST authorities. Despite having GST registration for other activities like renting property to third parties, the university had not paid GST on affiliation fees, considering them student-related and exempted.

Arguments Presented

Petitioner's Contentions (Goa University): Represented by Senior Advocate Mr. Raghuraman , the university argued that its activities, being a creature of a state statute and aimed at providing higher education as a public function, are not 'business' as defined under Section 2(17) of the CGST Act. Consequently, amounts received, such as affiliation fees, are statutory/regulatory fees, not 'consideration' for a 'supply' under Section 7. Thus, its core educational activities are not amenable to GST. The petitioner further contended that even if considered a service, it is exempt under Entry No. 66 of Notification No. 12/2017-CT(R), which exempts services provided by an educational institution to its students, faculty, and staff. The circulars, the university argued, were contrary to statutory provisions and the exemption notification and were illegally attempting to restrict the scope of the exemption.

Respondents' Contentions (GST Authorities): Senior Standing Counsel Ms. Asha Desai for the respondents argued that the petition was not maintainable due to the availability of an alternative remedy to challenge the Order-in-Original. She contended that education services are generally liable to tax, and the exemption notification 12/2017 is specific, exempting only services rendered directly to students, faculty, and staff or related to admission/examination. Inspection and affiliation fees, she argued, are not listed as exempted and are taxable supply of service (SAC 9992, 18% GST), clarified by the impugned circulars and GST Council recommendations. She relied on the definition of 'supply' and the fact that activities by Government/local authorities for consideration can be taxable.

Court's Analysis and Findings

The High Court first addressed the maintainability, agreeing to examine the petition because the challenge was based on the absence of jurisdictional facts – whether the university's activities were taxable at all.

The Court delved into the definitions of 'business' (Section 2(17)), 'supply' (Section 7), and 'consideration' (Section 2(31)) under the GST Act. Relying on several Supreme Court and High Court judgments on the nature of 'education' and activities of statutory bodies (including Ahmedabad Urban Development Authority , Rajiv Gandhi University of Health Sciences (Karnataka HC), Manonmaniam Sundaranar University (Madras HC)), the Court emphasized that education is a public function and activities undertaken by a statutory university are primarily statutory and regulatory, not commercial.

The Court specifically held that the affiliation fee collected by Goa University is in discharge of its statutory functions under the Goa University Act, 1984. This fee, the Court found, fails to qualify as 'consideration' in the commercial sense, as there is no 'quid pro quo' characteristic of a contractual obligation. It is a statutory fee, not a commercial receipt.

Furthermore, the Court interpreted Entry No. 66 of Notification No. 12/2017-CT(R). It agreed with the view that a university is an educational institution and that students of affiliated colleges are ultimately students of the university which grants them degrees. Therefore, the activities of the university, including the levying of affiliation fees which are essential for colleges to conduct courses and for students to appear for university examinations leading to degrees, fall under the first limb of the exemption entry (services by an educational institution to its students, faculty and staff).

Critically, the Court held that the impugned CBIC Circulars dated June 17, 2021, and October 11, 2024, were contrary to the statutory provisions (Sections 7 and 9) and the plain language of the exemption notification. The Court reiterated the settled principle that circulars cannot impose a levy where the statute does not, nor can they restrict or whittle down the scope of an exemption notification. The Circulars' clarification that affiliation services are not covered by the exemption was found to be erroneous, as affiliation is intrinsically linked to the admission and examination process of students.

The Court also noted that the GST demand was based on various income heads in the financial statements, including prospectus sale, sports fee, eligibility/migration fees, and interest income. It held that where the main activity is not business (i.e., education), incidental transactions would only be considered business if an independent intention to carry on business in those activities is established by the Department, which was not done. Interest income was noted to be specifically exempt under Notification 12/2017.

Conclusion

Finding a complete absence of jurisdictional facts required for levying GST on the petitioner University's activities, the Bombay High Court at Goa allowed the petition. The Court explicitly held that the activities of Goa University, being non-commercial and statutory in nature, are not amenable to GST. Consequently, the impugned show cause notice and the subsequent order demanding GST were quashed.

This judgment provides significant relief to statutory universities, clarifying that their core educational and regulatory functions, including the collection of affiliation fees, fall outside the purview of GST levy.