Service tax on Stiend for Appentices / Trainee

[RAJENDRA KHOMNE]

Sir,

We are manufacturing of Automobiles components. We are receiving Manpower Supply service from various agencies including from Two service provider are raising bills for reimbursement of Apprentice/Trainee Stipend and we are paying consultancy charges to them including amount. We are paying stipend amount to Two service provider. According to Apprentices Act,1961, Section 17 & 18, every apprentice undergoing apprenticeship training in a designated trade in an establishment shall be trainee and not a worker and the provisions of any law with respect to labor shall not apply to or in relation to such apprentice. Hence this apprentice supply service is not MRA (Manpower recruitment agency service). These apprentices are not our regular worker. They are doing work as trainee and as per government rules we have to pay stipend to them as Reimbursement of apprentice stipend & the service providers distribute the same amount to these apprentice candidate without receiving any profit or margin.

Pl guide, Is service tax applicable for Apprentice/Trainee Stipend? (Pl explain with rule)

Thanks,

R. M. Khomne

AI Summary

Debate on Service Tax for Stipends Paid to Apprentices Under Apprentices Act, 1961 and Finance Act, 1994. A manufacturing company inquires whether service tax applies to stipends paid to apprentices or trainees, as they are not regular workers but are engaged under the Apprentices Act, 1961. The company argues that the stipend is a reimbursement without profit, suggesting it should not be taxed as manpower supply. However, three respondents agree that under the Finance Act, 1994, apprentices and trainees fall under manpower supply services, requiring service tax payment under the reverse charge mechanism. They emphasize that the stipend qualifies as 'consideration' under the Act, necessitating tax payment.