Facts of the Case

This batch of 35 connected writ petitions (lead matter W.P.No.34617 of 2022, along with 34 companion petitions filed in 2023) was filed before the High Court for the State of Telangana at Hyderabad by Care College of Nursing and other affiliated nursing and paramedical colleges across Telangana — including Maruthi Paramedical Academy College of Nursing, Pulipati Prasad College of Nursing, Chandana College of Nursing, Shivananda College of Nursing, Sri Satyalaxmi College of Nursing, Deepthi College of Nursing, Apex College of Nursing, Thirumala College of Nursing and Poineer College of Nursing — against the Kaloji Narayana Rao University of Health Sciences (KNRUHS), the Central Board of Indirect Taxes and Customs, the Directorate General of GST Intelligence and the Commercial Taxes Department. KNRUHS, the university responsible for granting affiliation to these nursing colleges, issued a demand notice dated 26.02.2022 (with a reminder dated 24.08.2022) directing the colleges to pay 9% CGST and 9% SGST (18% GST) on the affiliation and inspection fees paid to the University from July 2017 onwards, after the GST authorities had directed the University to collect and deposit such tax. The colleges challenged the demand notices as illegal, arbitrary and violative of Articles 14, 19(1)(g) and 21 of the Constitution, contending that the fees were exempt under Notification No.12/2017-Central Tax (Rate) dated 28.06.2017.

Issues Involved

  1. Whether affiliation fees and inspection fees charged by a university from its affiliated colleges qualify as “services provided by an educational institution to its students, faculty and staff” exempt under Serial No.66 of Notification No.12/2017-Central Tax (Rate).
  2. Whether the amendment to Serial No.66 (Notification No.2/2018) and the clarifications of the 47th GST Council meeting extend the exemption to affiliation and inspection activities.
  3. Whether Karnataka High Court rulings exempting similar university fees under the erstwhile service tax regime remain applicable under the GST law.

Petitioner's Arguments

  • Serial No.66 of Notification No.12/2017 exempts services provided by an “educational institution”, and since the University's core function is affiliation — intrinsically tied to imparting uniform education standards — its affiliation and inspection activities fall within the exempt category.
  • The definition of “educational institution” in the notification is wide enough to cover a university providing education as part of a curriculum leading to a qualification, extending the exemption downstream to affiliation and inspection fees.
  • The subsequent insertion of Clause (aa) into Serial No.66, exempting services relating to admission or conduct of examination, shows a legislative intent to exempt allied activities such as affiliation as well.
  • Reliance was placed on Karnataka High Court decisions in M/s. Rajiv Gandhi University of Health Sciences and M/s. Bangalore University, where similar university fees were held exempt.
  • If GST is levied, the burden will inevitably be passed on to nursing students, defeating the very object of the education exemption and prejudicing students already admitted.

Respondent's Arguments

  • The demand itself originated because the GST authorities directed the University to collect and remit tax; the University did not itself dispute its GST liability on these fees.
  • Under Notification No.11/2017-Central Tax (Rate), “Education Service” under Heading 9992 is taxable, and only specific components carved out under Serial No.66 of Notification No.12/2017 are exempt — namely services rendered by an educational institution to its own students, faculty and staff, not affiliation and inspection fees charged to other institutions.
  • The 47th GST Council meeting clarified only that fees collected directly from students, faculty and staff (such as for admission, eligibility and migration certificates) are exempt; affiliation and inspection fees paid by colleges to the University were never covered.
  • The Karnataka High Court decisions relied upon by the petitioners were rendered under the service tax regime (Clause 66D of the Finance Act, 1994), a provision omitted with effect from 14.05.2016 and having no equivalent under the GST law, making those precedents distinguishable.

Court Order/Findings

  • The Court held that exemption notifications must be strictly construed against the person claiming the exemption, following the Constitution Bench ruling in Commissioner of Customs v. Dilip Kumar and Company.
  • Serial No.66 of Notification No.12/2017 exempts services rendered by an educational institution to its own students, faculty and staff; affiliation and inspection fees charged by the University from other institutions do not fall within this specifically enumerated exemption, and no exemption can be inferred merely because affiliation is functionally linked to education.
  • The Karnataka High Court's rulings in Rajiv Gandhi University of Health Sciences and Bangalore University were expressly disagreed with, as they were founded on the now-omitted Section 66D of the Finance Act, 1994, which has no counterpart under the CGST Act.
  • Since the fees are consideration for a taxable “education service” under Heading 9992 and are not covered by the specific exemption relied upon, the demand for GST on affiliation and inspection fees from July 2017 onwards was upheld.
  • Writ Petition No.34617 of 2022 and all 34 connected writ petitions were dismissed, without costs.

Important Clarification

  • The GST exemption for “educational institutions” under Serial No.66 of Notification No.12/2017-Central Tax (Rate) is confined to services an institution renders to its own students, faculty and staff; it does not automatically extend to fees a university charges other affiliated institutions for affiliation or inspection.
  • Judicial precedents interpreting the pre-GST service tax exemption under Section 66D of the Finance Act, 1994 cannot be mechanically transplanted into the GST regime, since that provision stands omitted and has no direct GST counterpart.
  • Exemption notifications are to be construed strictly against the assessee claiming the benefit; any ambiguity in the scope of an exemption is resolved in favour of the Revenue.

Sections Involved

  • Notification No.12/2017-Central Tax (Rate), dated 28.06.2017 (Serial No.66) — exempts specified services provided by an educational institution to its students, faculty and staff.
  • Notification No.11/2017-Central Tax (Rate), dated 28.06.2017 — prescribes the GST rate for “Education Services” under Heading 9992, the residuary taxable category.
  • Article 226 of the Constitution of India — writ jurisdiction invoked to challenge the demand notices.

Decision – In Favour of

Department. The Telangana High Court's dismissal of all 35 writ petitions upheld the GST demand on affiliation and inspection fees, resolving the exemption question squarely against the educational institutions and in favour of the Revenue.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court for the State of Telangana at Hyderabad
  • Case No.: W.P.No.34617 of 2022 and Batch (35 connected writ petitions)
  • CNR: Not available on record
  • Coram: Justice P. Sam Koshy and Justice Laxmi Narayana Alishetty
  • Decision Date: 17 October 2023
  • Disposal Nature: Dismissed

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