Agricultural University Laboratory Testing for External Clients Attracts 18% GST: Maharashtra AAR

In re Mahatma Phule Krishi Vidyapeeth (GST AAR Maharashtra)

The Maharashtra Authority for Advance Ruling examined whether laboratory testing charges collected by Mahatma Phule Krishi Vidyapeeth (MPKV), Rahuri, a statutory agricultural university established under Maharashtra legislation, were exempt from GST. The university provides agricultural education, research and extension services and conducts various laboratory tests, including soil testing, seed testing, plant disease diagnosis, water testing, animal feed analysis and other agricultural testing activities. These services are provided to students, research scholars, faculty members, farmers, government departments, private companies and other institutions. The applicant sought clarification regarding the applicability of GST to testing undertaken as part of its academic curriculum and research activities and to testing conducted for agricultural extension purposes.

The university contended that it was a government-funded statutory institution primarily engaged in agricultural education, research and public welfare. It submitted that testing conducted for students, researchers and faculty formed an integral part of its educational and research functions and was exempt under Entry No. 66 of Notification No. 12/2017-Central Tax (Rate), dated 28 June 2017. It further argued that laboratory testing provided to farmers and government departments qualified for exemption under Entries 4 and 5 relating to governmental functions entrusted to Panchayats and Municipalities, or Entry 54 covering specified agricultural support services. According to the applicant, the nominal charges recovered were intended mainly to reimburse testing expenses rather than generate commercial profits. The university also referred to its substantial dependence on government grants and relied on advance rulings involving other educational institutions and agricultural universities.

The jurisdictional officer opposed the claim of blanket exemption. The officer maintained that laboratory testing performed for consideration constituted a supply under Section 7 of the CGST Act, 2017, and that the university’s statutory status or receipt of government funding did not automatically exclude its activities from GST. The officer further submitted that exemptions under Notification No. 12/2017 were conditional and could not be extended merely because the services were performed by a public educational institution.

The AAR observed that the definition of business under Section 2(17) of the CGST Act was sufficiently wide to cover activities undertaken by public authorities and institutions, including activities carried out without a conventional profit motive. Laboratory testing charges constituted consideration for identifiable services, thereby satisfying the requirements of taxable supply under Section 7. Regarding Entries 4 and 5 of Notification No. 12/2017, the Authority examined the functions entrusted to Panchayats and Municipalities under Articles 243G and 243W of the Constitution. It held that the laboratory testing services provided by the university were not covered by the specified governmental functions merely because they related to agriculture or agricultural extension.

The Authority separately examined Entry 54 of Notification No. 12/2017, covering specified services directly related to cultivation and production of agricultural produce. It noted that laboratory tests conducted for private companies, including tests concerning yield, bioefficacy, phytotoxicity and plant analysis, were not directly connected with agricultural production in the manner required by the exemption. The AAR also rejected classification of these testing activities as agricultural extension services. Instead, it found that the services were appropriately classifiable under SAC 998346, relating to technical testing and analysis services, and attracted GST at 18%, comprising CGST at 9% and SGST at 9%.

However, the Authority accepted the exemption claim for laboratory testing conducted as part of the university’s academic curriculum and research activities for its students, research scholars and faculty members. Since MPKV satisfied the definition of an educational institution under Notification No. 12/2017, services provided to its students, faculty and staff in connection with recognised educational activities were eligible for exemption under Entry No. 66(a). Accordingly, the AAR distinguished between laboratory testing forming part of recognised educational activities and testing supplied to external recipients for consideration.

The AAR ruled that laboratory testing charges collected from students, research scholars and faculty members as part of academic curriculum and research activities were exempt from GST under Entry No. 66(a). Laboratory testing supplied to farmers, government departments, private companies and other external recipients did not qualify for the claimed exemptions under Entries 4, 5 or 54 and was taxable at 18% under SAC 998346. The ruling therefore established different GST treatments depending on the nature of the service and its connection with recognised educational activities.

Cases Discussed / Advance Rulings Cited

The applicant referred to the following advance rulings in support of its exemption claims. These were cited by the applicant; they were not all expressly adopted by the Maharashtra AAR.