Examiners Are Turning Into Examinees Before GST Authorities
Introduction
The growth, development, and quality of higher education are critical indicators of a modern and progressive India. With the third-largest higher education system in the world—following only the United States and China—India’s educational framework plays a central role in shaping the country’s future.
Universities form the core of this system, offering both Undergraduate (UG) and Postgraduate (PG) courses and awarding degrees and diplomas. India categorizes its universities into four types: Central, State, Private, and Deemed. While Central and State universities are established by respective governments, Deemed and Private universities are regulated under different frameworks including UGC oversight.
The university system is tasked not only with curriculum design and examination conduct but also with quality oversight, regulatory compliance, and adaptability to industry and societal changes.
In this article, we explore the issue of GST applicability on affiliation fees collected by universities from affiliated colleges—a concern now putting academic institutions under the lens of taxation authorities.
The Indian State’s Policy on Private Higher Education
Historically, higher education in India was predominantly public. Post-independence, India saw a deliberate policy shift to accommodate private institutions, aiming to democratize access to higher education. This resulted in an exponential increase in private colleges—from about 500 in 1950 to 37,204 in 2013, with over 60% of total student enrolment now in private institutions.
To regulate and ensure the quality of education in these institutions, the UGC empowers universities to grant affiliation and recognition, enabling them to offer degrees and receive research grants.
Affiliation: A Gateway to Legitimacy
Affiliation is a statutory process governed by UGC (Affiliation of Colleges Offering Technical Education by Universities) Regulations. Key parameters include:
- Minimum infrastructure requirements
- Faculty qualifications
- Industry-institute collaboration
- Research standards
Only after satisfying these requirements can private technical colleges legally admit students. Without affiliation, they would be treated as unauthorized coaching centres.
Universities charge affiliation fees based on UG and PG programs to cover their administrative and regulatory efforts. Renewal of affiliation is mandatory each year to ensure ongoing compliance and support course upgrades.
The GST Debate: Are Affiliation Fees Taxable?
Pre-GST Judicial Pronouncements
Madras High Court held that affiliation fees are statutory levies, collected under the provisions of relevant acts, and not amenable to service tax.
Services such as college affiliation were ruled as part of the university’s core educational functions, and therefore exempt from service tax.
The Karnataka High Court reinforced that granting affiliation is in furtherance of education and thus exempt under Clause 9 of the Service Tax Mega Exemption notification number 12/2012- Service Tax, dated the 17th March, 2012
Post-GST Scenario
Under GST, Entry 66 of Exemption Notification No. 12/2017 mirrors Clause 9 of the earlier service tax notification:
Exempt Services Include:
- Services by an educational institution to its students, faculty, and staff
- Services to an educational institution, such as transportation, catering, housekeeping
- Services related to admission or conduct of examinations
This entry forms the crux of the debate—does affiliation fall under exempt services related to education?
Advance Rulings Create Confusion
Recent Advance Rulings suggest otherwise:
- University of Kota (2023): Rajasthan AAR ruled that affiliation is a taxable supply, not covered under Entry 66.
- Bharathiyar University (2021): Tamil Nadu AAR gave a similar ruling, stating affiliation is not directly related to education services provided to students.
These rulings contradict earlier High Court judgments, creating a legal quagmire.
Is ‘Affiliation Fee’ a Consideration?
The core question remains: Is affiliation fee a consideration for a taxable service under GST?
Some argue that affiliation is an essential regulatory and quality assurance activity, not a commercial service. Others see it as a fee-for-service, potentially taxable.
Interestingly, Goa University successfully challenged departmental circulars attempting to levy GST, setting aside attempts to equate affiliation with taxable services.
Conclusion: A Call for Clarity
Legislation, at its heart, should promote public interest and welfare. Education—especially higher education—is a national priority and economic driver. Taxing affiliation fees under GST risks:
- Increasing the cost of education
- Burdening students and affiliated institutions
- Undermining the regulatory role of universities
It is essential for the GST Council and revenue authorities to step in and issue a clear exemption notification that protects the affiliation function of universities. Recognizing this activity as part of the larger educational ecosystem will ensure continuity, affordability, and fairness in higher education.
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Note: The views expressed are personal and intended to encourage a wider policy and legal discussion on the subject. The author of this article can be reached at caprudhvigst@gmail.com.
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