Andhra Pradesh High Court Holds Statutory Functions of State Universities Not Taxable Under GST Act

The Andhra Pradesh High Court, in a common order delivered by Justices R. Raghunandan Rao and T.C.D. Sekhar, addressed the legality of GST assessments imposed on several state universities for collecting affiliation and No Objection Certificate (NOC) fees from affiliated colleges. The universities, established under various State Acts, challenged assessment orders that treated these statutory fees as taxable supplies under the GST Act.

The petitioners argued that the collection of affiliation and NOC fees was a statutory obligation, not a business activity, and thus fell outside the scope of ‘supply of services’ as defined under Section 7 of the GST Act. They further contended that, even if considered a supply, such services would be exempt under Entry No. 66 of Notification No. 12 of 2017, and other relevant exemptions. The respondents, representing the tax authorities, maintained that any service provided by a governmental authority is taxable unless specifically exempted or excluded under the Act or relevant notifications.

The Court undertook a detailed analysis of the relevant statutory provisions, including Sections 2(17), 7, and 9 of the GST Act, and the pertinent exemption notifications. It observed that while Section 7(1) covers supplies made in the course or furtherance of business, the legislature had created a separate regime for supplies by government entities, making such supplies taxable regardless of whether they are in the course of business, unless specifically excluded or exempted. However, the Court found that the petitioner universities, though established by State legislation, are distinct legal entities and do not qualify as the Central Government, State Government, or local authorities for the purposes of these provisions.

Crucially, the Court held that the statutory functions performed by the universities—such as granting affiliation and issuing NOCs—are mandatory duties imposed by law, not voluntary business activities. As such, these actions do not fall within the definition of ‘business’ under Section 2(17) of the GST Act. The Court reasoned that the activities in question are not undertaken in the course or furtherance of business, and therefore do not constitute a ‘supply of service’ under Section 7. Consequently, the demand for GST on these statutory fees was found to be unsustainable.

The Court also noted that, in light of its finding that the services are not taxable in the first place, the question of exemption under the cited notifications did not arise. The Court distinguished its reasoning from a prior Telangana High Court decision, clarifying that the issue of taxability itself had not been addressed in that case.

In conclusion, the Andhra Pradesh High Court allowed the writ petitions, setting aside the impugned assessment orders and holding that the statutory functions of state universities in granting affiliation and NOCs do not attract GST liability. The judgment reinforces the principle that statutory duties performed by public universities are not subject to GST unless expressly brought within the tax net by the legislature.