Training organization qualifies as pure agent for stipend payments but not insurance reimbursements under Rule 33

AAR Gujarat ruled on GST liability for reimbursements received by training organization from industry partner. For stipend payments, the Authority held the organization qualified as pure agent under Rule 33 CGST Rules, as it was authorized to pay trainees on behalf of industry partner, amount was separately invoiced, and only actual incurred amount was reimbursed. However, for insurance premium reimbursement, the organization failed to qualify as pure agent because it could not substantiate that reimbursed amount represented actual insurance costs exclusively for trainees, as the policy covered both trainees and its own employees. Insurance reimbursement remains subject to GST.

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Issues Involved:
1. Whether the Applicant is acting as a pure agent of the Industry partner regarding the reimbursement received towards the stipend paid to Trainees.
2. Whether the Applicant is acting as a pure agent of the Industry partner regarding the reimbursement received against the cost of employee compensation insurance obtained for the benefit of Trainees.

Detailed Analysis:

Issue 1: Pure Agent Status for Stipend Reimbursement

Findings:
- The Applicant, M/s. Team Lease Education Foundation (TLEF), is an approved NEEM Facilitator under the NEEM Regulations, 2017.
- TLEF partners with various industry partners to provide practical training to NEEM trainees.
- The industry partners are responsible for paying a monthly stipend to the trainees through TLEF.
- TLEF raises invoices for the stipend payable to the trainees and includes applicable taxes.
- TLEF contends that it acts as a pure agent of the industry partner for the stipend payments and thus, the reimbursement should not be included in the taxable value under GST.

Legal Provisions:
- Section 9(1) of the GGST Act prescribes the levy of GST on the value determined under Section 15.
- Rule 33 of the CGST Rules, 2017, stipulates the conditions under which a supplier can act as a pure agent.
- The conditions include acting on authorization, separate indication of payments in invoices, and the procurement of supplies in addition to services provided on the supplier's own account.

Judgment:
- TLEF is authorized by the industry partner to make stipend payments to trainees and is reimbursed by the industry partner.
- The amount is separately indicated in the invoice.
- The work performed by the trainees is considered services procured by TLEF from the trainees.
- TLEF satisfies the conditions of Rule 33 for acting as a pure agent concerning stipend payments.
- Therefore, the reimbursement of the stipend is not chargeable to GST.

Ruling:
- TLEF is a pure agent of the industry partner for the reimbursement of the actual stipend amount incurred, and such reimbursement is not subject to GST.

Issue 2: Pure Agent Status for Insurance Reimbursement

Findings:
- TLEF obtains medical and accident insurance for the benefit of trainees and is reimbursed by the industry partner.
- TLEF submitted documents showing a single insurance policy covering both trainees and its employees.
- The insurance premium amount charged by the insurance company was for both trainees and TLEF's employees.
- TLEF failed to co-relate the actual insurance premium amount paid exclusively for trainees with the amount charged to the industry partner.

Legal Provisions:
- Rule 33 of the CGST Rules, 2017, requires that the supplier acts as a pure agent only if the actual amount incurred is reimbursed.
- Clause (d) of the explanation to Rule 33 specifies that the supplier must receive only the actual amount incurred for the procurement of goods or services.

Judgment:
- TLEF did not substantiate that the insurance amount charged to the industry partner was the actual reimbursement for trainees only.
- The conditions of Rule 33, particularly clause (d), were not satisfied.
- Cited cases (Yashaswi Academy and Cadmaxx Solution) were based on actual reimbursement, which was not substantiated in TLEF's case.

Ruling:
- TLEF is not a pure agent of the industry partner for the insurance premium amount.
- The insurance amount reflected in TLEF's invoices shall not be deducted from the taxable value and is subject to GST.

Conclusion:
1. TLEF is a pure agent for the reimbursement of the stipend paid to trainees, and such reimbursement is not chargeable to GST.
2. TLEF is not a pure agent for the reimbursement of the insurance premium amount, and such reimbursement is chargeable to GST.

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