Public universities in Maharashtra have been troubled for several months, receiving correspondence from Goods and Services Tax (GST) authorities either requesting information or initiating investigations into the lack of GST payments on affiliation fees. These universities have sought help from the state governor, who serves as their chancellor. They argue that if they are required to impose GST on colleges for affiliation fees, this cost would ultimately be passed down to students.

During a recent meeting of the Joint Board of Vice-Chancellors (JBVC) in the state, these universities brought up their concerns with Governor Ramesh Bais. Both the government and the governor’s office have pledged to advocate for them before the GST council, according to sources from the universities.

Although educational services provided directly to students, such as entrance exam fees, are exempt from taxation, the GST council determined in a meeting in May 2021 that a 18% GST would apply to other services offered by boards, like accreditation fees. This decision was elaborated on in a circular from the Central Board of Indirect Taxes and Customs (CBIC).

State university officials, however, claim that they do not collect accreditation fees from colleges but are being investigated for affiliation fees, which they argue are purely for educational services.

The GST authorities have sent letters seeking detailed information on affiliation and related fees from July 2017 to March 2023, and universities have been given 15 days to comply. “This sudden request and, in some instances, personal summonses by local officials, have made all universities anxious. Educational services have traditionally been outside the tax scope, and taxing universities for college affiliation fees will lead to higher costs for students,” stated a senior university official.

A university finance officer explains that the affiliation fees charged to colleges cover the educational services provided by universities, such as setting syllabi, conducting exams, and awarding degrees.

A government official mentioned that the GST Council had already addressed the issue of GST on services offered by educational boards in its 2021 meeting, leading to a circular in June of that year stating that 18% GST applies to accreditation fees.

The dispute arises because these recent requests for information specifically concern “affiliation” fees, which, according to experts, differ from the “accreditation” fees referenced in the circular. Indirect tax expert and chartered accountant Sunil Gabhawalla argues that affiliation and accreditation are different and that educational services should be GST-exempt, citing relevant court decisions though acknowledging that there have been conflicting rulings.

Meanwhile, the government official contends that the circular broadly covers all other services as well. The education sector and tax professionals are hopeful that the GST Council will resolve this issue soon.