GST Due on Affiliation & Inspection Fees for Private Medical Colleges: HC
Fact and issue of the case
Since the grounds of challenge and the petitioners and respondents, all being the same, we proceed to decide the batch of writ petitions by this common order.
This batch of writ petitions are filed by the educational institutions assailing the demand notice raised by the 1st respondent-University so far as payment of G.S.T. on the affiliation fee and inspection fee together with arrears from July, 2017 onwards.
For proper appreciation of facts, it would be more relevant to take note of the contents of the demand notice issued by the 1st respondent to each of the petitioners in all the writ petitions, which is extracted as under : “With reference to the subject cited and vide references cited, the University has been directed by GST authorities to collect and deposit the GST dues from July, 2017 onwards on affiliation and inspection fees paid by private institutions affiliated to K.N.R.U.H.S. In this regard, you are hereby directed to submit 9% S.G.S.T. and 9% C.G.S.T. (a total of 18% as G.S.T.) on the affiliation and inspection fee paid to the University from July, 2017 onwards in the form of Demand Draft in favour of the Registrar, K.N.R.U.H.S. payable at Warangal within 10 days. Kindly note that the D.D.s are to be submitted separately for each financial year and also please provide the details of affiliation fee and inspection fee paid in a table form year-wise for each Financial Year. Any further orders from the G.S.T. authorities shall be communicated to you for further course of action.”
For convenience, we are referring to the facts in Writ Petition No.34617 of 2022 as facts for the rest of the batch of writ petitions as well. However, the other connected batch of matters, which are also heard and decided together, are matters where the impugned demand notice have been raised in the present year, i.e., 2023.
Heard Mr. Gaddam Srinivas, learned counsel for the petitioners; Mr. Dominic Fernandes, learned Senior Standing Counsel, appearing on behalf of respondent Nos.2 and 3; and Mr. V. Rajeshwar Rao, learned Government Pleader for Commercial Tax Department, for respondent Nos.4 and 5 in Writ Petition No.24617 of 2022. None appeared for the 1st respondent – Kaloji Narayana Rao University of Health Sciences (K.N.R.U.H.S.)
All the petitioners in the present writ petition as also in the other connected writ petitions are educational institutions / colleges primarily imparting nursing course. All the colleges before this Court in the various writ petitions are all affiliated with the 1st respondent-Kaloji Narayana Rao University of Health Sciences (K.N.R.U.H.S.), (for short, ‘the 1st respondent-University’).
The 1st respondent is a University which has been established under the provisions of Act 6 of 1986. The colleges which intend to get affiliation the 1st respondent-University are required to undergo certain procedure. For the purpose of granting affiliation, the 1st respondent-University is required to first conduct an inspection and for this purpose, the University charges inspection fees as also affiliation fees from the respective colleges. All the colleges in this batch of writ petitions have paid the inspection fees for the inspection conducted as also the affiliation fees for the affiliation granted. 8. The G.S.T. law came into force w.e.f. 01.07.2017.
Recently, the respondent Nos.2 and 3 have raised demand of G.S.T. on the affiliation fees and inspection fees from the 1st respondent-University. Based upon the said demand, so raised by the respondent Nos.2 and 3, the 1st respondent-University in turn demanded payment of G.S.T. on the affiliation fees and inspection fees paid by each of these petitioners before this Court in the present batch of writ petitions. It is this demand raised by the 1st respondent-University from the petitioner-educational institutions which has led to filing of the present writ petition.
At the time when the G.S.T. law was enacted, “Education Service” was one of the subjects which was taxable under the ‘Heading No.9992’ as per notification dated 28.06.2017. Subsequently, there were certain categories of services provided by the educational institutions which stood exempted from levy of G.S.T. It is this exemption of levy of G.S.T. upon certain category of services rendered by the educational institutions as per notification No.12 of 2017, dated 28.06.2017, which has been heavily relied upon by the petitioners praying for allowing of the writ petitions and quashment of the impugned demand notice raised by the 1st respondent-University for payment of G.S.T.
Learned counsel for the petitioners contended that perusal of Serial No.66 of Notification No.12 of 2017, dated 28.06.2017, would show that the services provided by an educational institution stands exempted from payment of G.S.T. He further contended that the term “educational institution” has been further defined in the same notification in Clause (y) of Section 2 of the G.S.T. Act. According to learned counsel for the petitioners, in terms of the said definition, an institution providing education services as a part of curriculum for obtaining a qualification, would by itself bring within it the University. In the process, the collection of fees towards inspection and affiliation also would get exempted from levy of G.S.T. In addition, he contended that the amendment brought to Serial No.66 of the Notification No.12 of 2017, dated 28.06.2017, by incorporating Clause (aa) also would make it emphatically clear that conduction of entrance examination and collection of entrance fees also has been brought within the exempted category and, thus, it would include affiliation and inspection fees as well.
In support of his contention, learned counsel for the petitioners firstly relied upon a recent decision of a learned Single Judge of the Karnataka High Court in M/s. Rajiv Gandhi University of Health Sciences vs. Principal Additional Director General, Directorate General of GST Intelligence and others1 and also in M/s. Bangalore University vs. Principal Additional Director General, Directorate General of GST Intelligence and others2, wherein the learned Single Judge allowed the said writ petitions by setting aside the show-cause notice and also the consequent further actions as well, raised by the University from the respective colleges.
Additionally, learned counsel for the petitioners also placed reliance on the following decisions of the Hon’ble Apex Court in The Principal and others vs. The Presiding Officer and others3, Chairman, Bhartia Education Society vs. State of Himachal Pradesh4 and Maharishi Markandeshwar Medical College and Hospital vs. State of Himachal Pradesh5.
Learned counsel for the petitioners relied on the above decisions to show that affiliation is intrinsically connected with the educational institutions having affiliation from a particular University. That since the object of the University also is to ensure uniform curriculum and standards among the different affiliated colleges imparting education on the same course. In the instant case, it is the nursing course which is being imparted by the petitioners herein, therefore, the 1st respondent-University would also fall within the purview of ‘educational institution’ and as such the petitioners would also be exempted from levy of G.S.T. on the inspection fees and affiliation fees.
Learned counsel for the petitioners further contended that in the event, the said fees becomes amenable to G.S.T. and if the petitioners are made to pay G.S.T. on the inspection fees and affiliation fees, the petitioner-Colleges would be compelled to pass on the burden on the students who get admitted to the respective colleges of the petitioners. Thus, in terms of Serial No.66 of the notification No.12 of 2007, dated 28.06.2017, since it exempts so far as the services rendered by the educational institutions to the students, the petitioners should not be compelled to pay G.S.T. on the inspection fees and the affiliation fees. It would also be detrimental to the interest of the students who have meanwhile taken admission to the petitioner-Colleges.
Per contra, Mr. Dominic Fernandes, for Commercial Tax, for respondent Nos.2 to 4, contended that the impugned demand notice is one which is in fact raised by the 1st respondent-University and the 1st respondent-University as such has not disputed or denied payment of G.S.T. on the inspection fees or affiliation fees.
Learned Special Standing Counsel for respondent-Department further submitted that in terms of Notification No.11 of 2017, dated 28.06.2017, the Government had made it expressly clear that under the ‘Heading – 9992’, the educational institution is one which is taxable under the G.S.T. law. The term ‘Education Service’ includes various components viz., affiliation fees, inspection fees and various other fees which is collected both by the 1st respondent-University as also by the respective colleges affiliated to the 1st respondent-University. It was further contended that after making education service taxable, the Government relaxed the same to some extent vide Notification No.12 of 2017, dated 28.06.2017, and it is that which is reflected upon in Serial No.66 of the said notification. Clause (a) of Serial No.66 under the same ‘Heading – 9992’ prescribing services provided by an educational institution to its students, faculty and staff to be one under the exempted category so far as the levy of tax is concerned.
According to learned counsel for the respondent-Department, a plain reading of Serial No.66 (which was further amended vide Notification No.2 of 2018, dated 25.01.2018) would go to show that the collection of affiliation fees and inspection fees does not stand exempted. It was the further contention of learned counsel for the respondent-Department that, in the 47th G.S.T. Council Meeting held on 28/ 29.06.2022, one of the topic of discussion in their agenda was in respect of the confusion that prevailed regarding the taxability of G.S.T. on sale of application forms to the prospective students, issue of migration, eligibility forms to graduate students, affiliation works and other educational activities. In this context, the G.S.T. Council had in its aforesaid meeting categorically resolved that the services provided by the educational institutions to its students, faculty and staff stands exempted vide Notification No.12 of 2017, dated 28.06.2017.
Observation of the court
Relying upon the constitutional decision of the Hon’ble Apex Court also, we are of the firm view that firstly, the Notification No.12 of 2017, dated 28.06.2017, cannot be made applicable upon inspection and affiliation fees charged by the 1st respondent-University from the educational institutions. Secondly, since so far as inspection and affiliation fees charged by the 1st respondent-University from the educational institutions has not been specifically exempted in terms of the Constitution Bench judgment in M/s. Dilip Kumar and Company (6 supra), the said benefit cannot be extended to the petitioners. As regards the two decisions rendered by the Karnataka High Court in M/s. Rajiv Gandhi University of Health Sciences (1 supra) and in M/s.Bangalore University (2 supra), which was heavily relied upon by the learned counsel for the petitioners, we are in complete agreement to the contentions raised by the learned counsel for the respondent-Department that the learned Single Judge of the Karnataka High Court while passing orders in the aforesaid two decisions, has relied upon the provisions of Finance Act, 1994 (Clause 66D). Sub-Clause (l) of Clause 66D of the Finance Act, 1994 which in fact, first of all, stood omitted by the Finance Act, 2016 w.e.f. 14.05.2016. Secondly, what also needs to be mentioned is that under the G.S.T. law there is no such provision as Sub-Clause (11) of Clause 66D of the Finance Act. Therefore, we are inclined to respectfully disagree with the view taken by the Karnataka High Court in the aforesaid two decisions. Therefore, the said decisions are distinguishable in facts and law.
For all the aforesaid reasons, we do not find any substance in the contentions raised by the learned counsel for the petitioners. Accordingly, the Writ Petition No.34617 of 2022 stands dismissed. Consequently, all the connected writ petitions also stand dismissed. No costs.
As a sequel, miscellaneous petitions pending if any in these writ petitions, shall stand closed.
1 W.P.No.57941 of 2018, decided on 26.07.2022
2 W.P.No.112 of 2019, decided on 26.07.2022
3 (1978) 1 S.C.C. 498 4 (2011)
4 S.C.C. 527
6 S.C.C. 675 6 (2018)
9 S.C.C. 1 (F.B.) (S.C.)
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