University affiliation is a statutory regulatory function, not a taxable supply of service under GST.

The Petitioner, a State University established under the Rajasthan Technical University Act, 2006, performs statutory functions including granting affiliation to colleges, prescribing curriculum, and conferring degrees.

From FY 2016-17 to 2021-22, the University did not collect GST on affiliation fees, believing the activity was exempt as an integral part of educational services.

In 2022, GST authorities initiated an investigation based on an Advance Ruling (Bharathiar University) holding affiliation services taxable at 18%.

Under pressure, the Petitioner deposited ₹4,25,86,142/- as GST and ₹3,02,68,940/- as interest.

Subsequently, the Respondents issued a Show Cause Notice dated 26.12.2023 under Section 74 of the CGST Act, alleging suppression and willful evasion to impose penalties.

The Petitioner challenged the SCN and the taxability of affiliation fees via writ petition.

1. Whether the grant of affiliation by a University constitutes a “supply of service” in the course or furtherance of business under Section 7 of the CGST Act, 2017?

2. Whether affiliation fees constitute “consideration” as defined under Section 2(31) of the Act?

3. Whether affiliation services are exempt from GST under Entry 66 of Notification No. 12/2017-CT (Rate)?

4. Whether the invocation of Section 74 (penalty for fraud/suppression) was legally sustainable?

The Court primarily interpreted Section 7 of the CGST Act, which defines "supply" as activities made for "consideration" in the "course or furtherance of business".

It applied the definition of "business" under Section 2(17), noting it typically involves trade or commerce.

The Court relied on Entry 66 of Notification No. 12/2017-CT (Rate), which exempts services provided *by* an educational institution to its students and services provided *to* an educational institution relating to admission or conduct of examinations.

It followed the ratio in Goa University v. Joint Commissioner [2025 SCC OnLine Bom 1262] and Madurai Kamaraj University v. Joint Commissioner [(2021) 54 GSTL 385 (Mad.)], which held that affiliation is a statutory regulatory function and not a commercial service.

It also applied the principle from Asst. CIT v. Ahmedabad Urban Development Authority [(2023) 4 SCC 561] that regulatory fees collected by statutory bodies are not "business" receipts.

The Court reasoned that affiliation is a *sine qua non* for imparting education and conferring degrees; thus, it is a statutory/regulatory duty rather than a commercial "business" activity.

It held that affiliation fees are mandatory statutory imposts lacking the *quid pro quo* necessary to qualify as "consideration" under Section 2(31).

Harmoniously construing Section 7(1)(a) and (aa), the Court determined that the "furtherance of business" requirement is implicit; since the University's core mandate is non-commercial, the levy fails the jurisdictional test.

Regarding the exemption, the Court adopted a purposive interpretation of Entry 66, holding that since colleges are facilitators and degrees are awarded to students by the University, affiliation is a service "relating to admission or conduct of examination".

It rejected the Respondents' reliance on CBIC Circulars, noting that executive clarifications cannot override statutory exemptions or the nature of a transaction.

It quashed the Show Cause Notice dated 26.12.2023.

The Court ordered the Respondents to refund the GST and interest already paid by the Petitioner within four months, provided the burden was not passed onto students, failing which 7% per annum interest would apply.

It concluded that universities must be treated at par with Educational Boards (exempted via Notification 14/2018), and any distinction is "manifestly arbitrary".