University affiliation fees not taxable under GST: Raj HC; Show cause notice and penalty proceedings quashed

Jaipur/Jodhpur: The Rajasthan High Court has held that grant of affiliation by a State University to its constituent or affiliated colleges is an integral part of the educational process and does not constitute a “supply of service” liable to Goods and Services Tax (GST). The Court ruled that affiliation is a statutory and regulatory function, not a commercial activity carried out “in the course or furtherance of business” under the Central Goods and Services Tax Act, 2017.

A Division Bench comprising Justice Arun Monga and Justice Yogendra Kumar Purohit set aside the show cause notice issued to Rajasthan Technical University, Kota, and quashed consequential proceedings initiated under Section 74 of the CGST/RGST Acts. The Court further held that even assuming affiliation were to be treated as a service, it would fall within the exemption available to educational services under Entry 66 of Notification No. 12/2017-CT (Rate). The Bench also found the invocation of extended limitation and penalty provisions to be legally unsustainable in the absence of fraud, suppression, or intent to evade tax.

Rajasthan Technical University (RTU), a State University established under the Rajasthan Technical University Act, 2006, grants affiliation to more than 140 colleges offering undergraduate and postgraduate technical education to over 40,000 students. Under its governing statute and regulations, the University is empowered to prescribe conditions for affiliation and to levy affiliation and related regulatory fees.

Under the pre-GST service tax regime, educational services—including those provided by universities—were exempt from service tax. After the introduction of GST in July 2017, RTU continued to treat affiliation as an exempt educational activity and did not collect GST on affiliation fees for academic years 2017–18 to 2022–23.

In 2022, GST authorities sought information regarding affiliation fees collected by the University and, relying on an advance ruling in the case of Bharathiar University, demanded GST at 18% along with interest and penalty. Without admitting liability, RTU deposited over ₹4.25 crore towards GST and approximately ₹3.02 crore towards interest, even before issuance of any show cause notice.

Subsequently, a show cause notice dated 26 December 2023 was issued under Section 74 of the CGST Act, alleging suppression, wilful misstatement, and evasion of tax, and proposing imposition of penalty. Aggrieved, the University approached the High Court.

The University contended that affiliation is a statutory regulatory function performed in discharge of public duties, essential for maintaining academic standards, conducting examinations, and awarding degrees. It argued that such activity does not amount to “business” under Section 2(17) of the CGST Act, nor do affiliation fees constitute “consideration” for any commercial service.

It was further argued that affiliation is inseparable from the educational process and squarely covered by Entry 66 of Notification No. 12/2017, which exempts services provided by educational institutions. The University also challenged the reliance on CBIC circulars and press notes, submitting that executive instructions cannot override statutory exemptions or impose a tax in violation of Article 265 of the Constitution.

On the issue of penalty, RTU submitted that it had acted under a bona fide belief supported by the earlier service tax regime, had cooperated fully with the authorities, and had voluntarily paid tax and interest prior to issuance of the show cause notice—thus excluding any allegation of fraud or intent to evade tax.

The GST Department, on the other hand, argued that affiliation is a distinct service provided by the University to colleges, not to students, and is therefore outside the scope of exempt educational services. It contended that exemptions must be strictly construed and, since affiliation was not expressly mentioned in the notification, GST was payable. The Department justified invocation of Section 74 on the ground of non-payment of tax over several years.

After examining the statutory framework and judicial precedents, the High Court held that affiliation is the sine qua non for imparting university education. Without affiliation, colleges cannot admit students, conduct examinations, or enable conferment of degrees. The Court observed that colleges merely act as facilitators, while the real beneficiaries of affiliation are students, who ultimately receive degrees from the University.

The Bench categorically held that affiliation lacks any element of commerciality and does not satisfy the requirement of being carried out “in the course or furtherance of business” under Section 7 of the CGST Act. Consequently, the levy of GST on affiliation fees was held to be unsustainable.

The Court further ruled that Entry 66 of Notification No. 12/2017 must be interpreted broadly, noting that expressions such as “relating to admission or conduct of examination” have wide amplitude and cover all activities integrally connected with education, including affiliation. The Court rejected the narrow interpretation adopted by the tax authorities.

On the issue of penalty, the Court found that none of the statutory preconditions for invoking Section 74 were satisfied. There was no suppression, fraud, or intent to evade tax, particularly when the University had disclosed all material facts and voluntarily paid tax and interest prior to issuance of the show cause notice. The proceedings were therefore held to be without jurisdiction.

Accordingly, the High Court quashed the show cause notice dated 26 December 2023 and all consequential proceedings, granting relief to the University and similarly placed institutions covered by the batch of connected petitions.

Case Title

Rajasthan Technical University, Kota v. Union of India & Ors.

Case Number

D.B. Civil Writ Petition No. 9556/2024
(Connected with a bunch of petitions as per Appendix “A”)

Court

High Court of Judicature for Rajasthan at Jodhpur

Bench

Hon’ble Mr. Justice Arun Monga
Hon’ble Mr. Justice Yogendra Kumar Purohit

Date of Order

Pronounced on: 23 February 2026
(Judgment Reserved on: 15 January 2026) 206800095562024_10

Advocates

For the Petitioner(s):

• Mr. Sharad Kothari
• Mr. Kalpit Shishodia
• Mr. Dinesh Kumar Bishnoi
• Mr. Chirag Soni
• Mr. Abhimanyu Yadhuvanshi
• Mr. Bhuwaneshwar Singh Sisodia
• Mr. C.S. Kotwani, with Mr. Avdesh Parashar
• Mr. Ankur Mathur
• Mr. Divik Mathur
• Mr. Rahul Lakhwani
• Ms. Adwaita Sharma
• Mr. Chayan Bothra
• Mr. Vinay Kothari, with Mr. Bhavyadeep Singh

For the Respondent(s):

• Mr. Mahaveer Bishnoi, Additional Advocate General
• Mr. Harshwardhan Singh
• Mr. Mrigraj Singh Rathore
• Mr. Rajvendra Saraswat, with Mr. Jitesh Kumar Suthar
• Mr. Rajeev Purohit
• Ms. Akshiti Singhvi 206800095562024_10

Judgments Relied Upon

As discussed and relied upon in the order, inter alia:

• Goa University v. Joint Commissioner of Central Goods and Services Tax
• Bengaluru North University v. Joint Commissioner of Central Tax, GST Commissionerate
• Principal Additional Director General, DGGSTI v. Rajiv Gandhi University of Health Sciences
• Sole Trustee, Lok Shikshana Trust v. CIT
• T.M.A. Pai Foundation v. State of Karnataka
• Assistant CIT v. Ahmedabad Urban Development Authority
• CCE v. Ratan Melting & Wire Industries
• Sandur Micro Circuits Ltd. v. CCE
• State Wakf Board, Madras v. Abdul Azeez Sahib