Appellant cannot claim deduction of stipend reimbursements from NEEM Trainers under Rule 33 CGST Rules 2017

AAAR Maharashtra ruled that the appellant could not claim deduction of stipend reimbursements from NEEM Trainers under Rule 33 of CGST Rules, 2017. The authority determined the appellant failed to qualify as a pure agent since they were not duly authorized to make payments on behalf of trainers and had independent obligations under NEEM Regulations to pay stipends directly to trainees. The deployment of trainees constituted a single supply with administration being ancillary work, and the appellant's responsibility for stipend payments arose from their own regulatory obligations rather than acting as the trainer's agent.

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Issues involved:
1. Validity of the contract between the Appellant and LG.
2. Contradictions in the agreement with Interplex.
3. Applicability of GST on reimbursement amounts received by the Appellant.
4. Whether the Appellant acts as a "pure agent" under Rule 33 of the CGST Rules, 2017.

Summary:

1. Validity of the contract between the Appellant and LG:
The Appellant argued that the validity of the contract with LG was not in dispute and that the contract was genuine as services were provided, and payments were received. The Appellant contended that the AAR erred by focusing on the contract's expiration date and not considering the ongoing nature of the business.

2. Contradictions in the agreement with Interplex:
The Appellant argued that the agreement with Interplex was consistent with AICTE (NEEM) Regulations. The AAR's finding of contradictions was contested, and the Appellant emphasized that the stipend amount was pegged to the minimum wages fixed by the Government, ensuring no exploitation of NEEM Trainees.

3. Applicability of GST on reimbursement amounts received by the Appellant:
The Appellant claimed that the reimbursement amount received from NEEM Trainer towards "Stipend and other expenses incurred by the Appellant in accordance with AICTE (NEEM) Regulations" should not attract GST. The Appellant argued that they acted as a conduit for payment and did not provide the service directly to NEEM Trainer.

4. Whether the Appellant acts as a "pure agent" under Rule 33 of the CGST Rules, 2017:
The Appellant argued that they fulfilled all criteria to be considered a "pure agent" and hence, the reimbursement amounts should not be included in the value of taxable supply. However, the appellate authority found that the Appellant did not meet the conditions of Rule 33, such as authorization by the NEEM Trainer, separate invoicing for pure agent expenses, and the nature of supply being additional to the services provided on their own account.

Discussion and Findings:
The appellate authority examined the agreements and found that the Appellant did not satisfy the conditions to qualify as a "pure agent." The agreements did not show that the NEEM Trainer authorized the Appellant to make stipend payments on their behalf. The Appellant was found to be directly responsible for paying the stipend to NEEM Trainees, and the reimbursement was considered part of the consideration for the supply of deployment services.

Order:
The appellate authority upheld the AAR's decision with some modifications, ruling that the reimbursement amount received by the Appellant from NEEM Trainer towards "Stipend and other expenses incurred by the Applicant in accordance with AICTE (NEEM) Regulations" is not in the capacity of a pure agent. The appeal filed by M/s Beeup Skills Foundation was rejected.

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