Trust's job training programs taxable at 18% GST, stipend transfers non-taxable as conduit

AAR Karnataka ruled on GST applicability for a trust facilitating job training programs. The trust's activities were not covered under charitable exemptions in Notification 12/2017. Stipend reimbursement collected and transferred to trainees without deduction was held non-taxable as the trust acted as mere conduit. Training charges levied on companies were taxable at 18% (9% CGST + 9% SGST) under entry 35 of Notification 11/2017. Insurance premium reimbursements were non-taxable. Onboarding charges and on-rolls conversion charges for trainee sourcing were taxable at 18% under SAC 998519, entry 23(ii) of Notification 11/2017.

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Issues Involved:
1. Taxability of stipend reimbursement.
2. Taxability of training charges.
3. Taxability of Group Health Insurance and Workman Compensation Policy premiums.
4. Taxability of expenditure recovery for onboarding trainees.
5. Taxability of on-rolls conversion charges.

Issue-wise Detailed Analysis:

1. Taxability of Stipend Reimbursement:
The applicant, a registered trust under Section 12A of the Income Tax Act, 1962, is engaged as a NEEM (National Employability Enhancement Mission) Facilitator. Under NEEM, the applicant facilitates on-the-job training for trainees. The stipend paid to the trainees by the companies through the applicant is not subject to GST. The applicant acts as a pure agent, merely collecting and transferring the stipend without making any deductions. Hence, the reimbursement of the stipend paid to the trainees does not attract tax under the GST Acts.

2. Taxability of Training Charges:
The applicant provides additional training to the trainees, and the companies pay a predetermined training fee for this service. This training fee is not exempt under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. Therefore, it is taxable under entry no. 35 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 at a rate of 9% under the CGST Act and similarly at 9% under the Karnataka Goods and Services Tax Act, 2017.

3. Taxability of Group Health Insurance and Workman Compensation Policy Premiums:
The applicant arranges Group Health Insurance and Workman Compensation policies for the trainees, with the premiums being reimbursed by the trainer companies. The insurance company is the service provider, and the applicant is the service recipient. The reimbursement of these premiums by the trainer companies to the applicant is not liable to tax under the GST Acts.

4. Taxability of Expenditure Recovery for Onboarding Trainees (Sourcing Fees):
The applicant collects a sourcing fee from the trainer companies for the purpose of sourcing trainees. This fee is a mutually agreed amount as per the contract and is classified under SAC 998519. It is liable to tax at 9% CGST under entry no. 23(ii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and similarly at 9% under the Karnataka Goods and Services Tax Act, 2017.

5. Taxability of On-Rolls Conversion Charges:
When a trainee sourced by the applicant is absorbed into regular employment by the company, the applicant charges a one-time "on-rolls conversion fee." This service is also classified under SAC 998519 and is liable to tax at 9% CGST under entry no. 23(ii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and similarly at 9% under the Karnataka Goods and Services Tax Act, 2017.

Ruling:
1. The reimbursement of the stipend paid to the trainees does not attract tax under the GST Acts.
2. The additional training to the trainees for which the training fees are paid by the trainer is taxable at 9% under both the CGST Act and the Karnataka Goods and Services Tax Act, 2017.
3. The reimbursement of Group Insurance and Workmen Compensation premiums by the trainer company to the applicant is not liable to tax under the GST Acts.
4. The sourcing fees collected by the applicant from the trainer companies are liable to tax at 9% under both the CGST Act and the Karnataka Goods and Services Tax Act, 2017.
5. The "on-rolls conversion charges" collected by the applicant from the trainer companies are liable to tax at 9% under both the CGST Act and the Karnataka Goods and Services Tax Act, 2017.

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