Third-party organization marketing yoga courses cannot claim GST exemption without proving pure agent status under Rule 33 CGST Rules 2017.

AAR Kerala ruled that a third-party organization marketing exempted yoga courses cannot claim GST exemption on yoga course fees collected on behalf of yoga institutions. The applicant failed to provide documentary evidence proving it operates as a pure agent under Rule 33 of CGST Rules, 2017, which requires contractual arrangements, separate invoice indication, and strict cost pass-through without markup. Without meeting these mandatory conditions, the yoga course fee component remains taxable under GST.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Authority for Advance Ruling (AAR) are:

• Whether the GST exemption available to charitable Yoga institutions for their Yoga course fees under Notification No. 12/2017-Central Tax (Rate) extends to third-party digital platforms that market and facilitate registrations for such Yoga courses.
• Whether the applicant, acting as an intermediary or aggregator collecting Yoga course fees on behalf of exempted Yoga institutions, can claim exemption from GST on the Yoga course fee component.
• Whether the applicant can exclude the Yoga course fee component from its taxable value under the "pure agent" concept as per Rule 33 of the CGST Rules, 2017.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Applicability of GST exemption for Yoga course fees to third-party digital platforms marketing exempt Yoga courses

Relevant legal framework and precedents: The exemption is governed by Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, specifically Entry No. 80, which exempts services provided by charitable entities registered under Section 12AA/12AB of the Income Tax Act, 1961, by way of training or coaching in recreational activities relating to arts, culture, or sports, including Yoga. CBIC Circular No. 66/40/2018-GST clarifies that such exemption applies only to entities registered under Section 12AA/12AB providing Yoga services.

Court's interpretation and reasoning: The AAR noted that the exemption is institution-specific and applies only to Yoga institutions that are charitable entities registered under the Income Tax Act. The applicant, a private limited company, does not qualify as such an entity and therefore cannot independently claim exemption on the Yoga course fees collected.

Key evidence and findings: The applicant operates a digital platform facilitating registrations and collects the entire course fee on behalf of Yoga institutions. However, the institutions' exemption status does not automatically extend to the applicant.

Application of law to facts: Since the applicant is not a registered charitable entity, the exemption under Notification No. 12/2017 cannot be availed by it for the Yoga course fee component. The exemption is strictly limited to the charitable Yoga institutions themselves.

Treatment of competing arguments: The applicant argued that since it collects fees on behalf of exempted institutions, it should be able to pass on the exemption. The AAR rejected this, emphasizing the institutional nature of the exemption.

Conclusions: The exemption available to Yoga institutions does not extend to third-party digital platforms marketing or facilitating registrations for such courses.

Issue 2: Applicability of GST on the platform service fee charged by the applicant

Relevant legal framework and precedents: The applicant's service of online promotion, registration, and facilitation falls under SAC 998397 (Sponsorship and brand promotion services), which attracts GST at 18% as per Notification No. 11/2017-Central Tax (Rate), Sl. No. 21.

Court's interpretation and reasoning: The AAR held that the platform service fee charged by the applicant is a distinct taxable service and is liable to GST at the prescribed rate.

Key evidence and findings: The applicant separately charges platform service fees and GST on these fees.

Application of law to facts: The platform service fee is a supply of service by the applicant and is not exempt.

Treatment of competing arguments: The applicant did not dispute the taxability of its platform service fee.

Conclusions: GST applies on the platform service fee charged by the applicant at the rate of 18%.

Issue 3: Whether the applicant can claim exemption on Yoga course fees under the "pure agent" concept (Rule 33 of the CGST Rules, 2017)

Relevant legal framework and precedents: Rule 33 of the CGST Rules, 2017 allows exclusion of expenditure or costs incurred by a supplier acting as a pure agent of the recipient from the value of supply, subject to strict conditions:

• The supplier acts as a pure agent of the recipient, makes payment to a third party on the recipient's authorization, and is contractually bound to do so;
• The actual amount incurred is separately indicated in the invoice;
• The goods/services procured are in addition to the supplier's own supply;
• The supplier does not hold title, does not use the goods/services for personal benefit, and recovers only actual cost without markup.

The Supreme Court decision in Intercontinental Consultants & Technocrats Pvt. Ltd. v. Union of India emphasized strict compliance with these conditions to claim exclusion from taxable value.

Court's interpretation and reasoning: The AAR observed that the applicant had not provided any documentary evidence or contractual arrangements demonstrating fulfillment of all conditions under Rule 33. Mere collection of fees on behalf of Yoga institutions does not automatically qualify the applicant as a pure agent.

Key evidence and findings: No contracts or invoices were submitted showing separate indication of Yoga course fees or authorization from Yoga institutions. The applicant operates as a principal in the transaction chain rather than a pure agent.

Application of law to facts: Without strict compliance with Rule 33 conditions, the Yoga course fee component cannot be excluded from the applicant's taxable value.

Treatment of competing arguments: The applicant contended it merely collects fees on behalf of institutions and should not be taxed on that portion. The AAR rejected this absent evidence of pure agent status.

Conclusions: The applicant cannot exclude the Yoga course fee from its taxable value under Rule 33 unless it conclusively establishes pure agent status with supporting documentation and contractual framework.

3. SIGNIFICANT HOLDINGS

The Authority for Advance Ruling held:

"No - A third party organization which markets an exempted Yoga course is not exempted from GST for the Yoga course fees component. However, if the service offered by them is in the nature of pure agent within the scope of Rule 33 of the CGST Rules, 2017, they would be entitled for exemption from GST for the Yoga course fees component."

Core principles established include:

• The GST exemption for Yoga course fees under Notification No. 12/2017-Central Tax (Rate) is institution-specific and applies only to charitable entities registered under Section 12AA/12AB of the Income Tax Act.
• Third-party digital platforms or aggregators, being private entities not registered as charitable institutions, cannot claim exemption on Yoga course fees collected on behalf of such institutions.
• GST is applicable on platform service fees charged by such third-party entities at the prescribed rate.
• The "pure agent" concept under Rule 33 of the CGST Rules, 2017, allows exclusion of certain costs from taxable value only if all strict and cumulative conditions are met, including contractual authorization, separate invoicing, and no markup.
• Absent documentary evidence and contractual arrangements, a third-party platform cannot claim pure agent status and must include the entire Yoga course fee in its taxable value.

Final determinations on each issue:

• The GST exemption available to Yoga institutions does not extend to third-party platforms marketing their courses.
• The applicant must pay GST on the entire Yoga course fee component unless it qualifies as a pure agent under Rule 33.
• The applicant must pay GST on its platform service charges at 18%.
• Future arrangements fulfilling Rule 33 conditions may allow exclusion of Yoga course fees from taxable value.

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