TaxTMI 
TaxTMI 
2022 (3) TMI 574
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.... engaged in charitable activities with an objective to promote and sponsor educational institutions including universities dedicated to inculcation of domain specific, workplace relevant and life related skills and competences for enhancing employability, work culture, enhanced productivity, economic development, social harmony and social life through offer of technology supported, industry relevant and low-cost academic programs with employment at the heart of academic offerings. 3. In view of the above, the applicant has sought advance ruling in respect of the following questions:- a. Whether, the Applicant is acting as a pure agent of the Industry partner to the extent of reimbursement received towards stipend paid to trainees on behalf of Industry partner as part of training agreement and therefore the said reimbursement is not chargeable to GST? b. Whether, the Applicant is acting as a pure agent of the Industry partner to the extent of reimbursement received against cost of medical and accident insurance obtained for the benefit of trainees by the Applicant and reimbursed by the Industry partner as per the training agreement and therefore the said reimbur....
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....ers / Company / Industry (Industry partner) for imparting training to NEEM trainees. 4.4 The Applicant has entered into training agreements with various companies (industry partners) for imparting practical training and has registered them as training partner in accordance with NEEM Regulations. The applicant furnished a copy of sample agreement (Training agreement' or 'agreement') with one of the clients M/s LG Electronics India Private Limited (Industry partner'). 4.5 The Industry partner, as per the training agreement, is under the following obligations:- a. Providing adequate facilities (viz. requisite personnel, facilities, industry knowledge and infrastructure) in accordance with the NEEM Regulations for the training. b. Payment of monthly stipend ('stipend') to the Applicant for the purpose of paying to the trainees in consideration of dedicated deployment of the trainees and in accordance with the NEEM Regulations. c. Reimbursement of cost of medical and accident insurance obtained by the Applicant for the benefit of the Trainees. d. Payment of administrative fee, sourcing fee, fee for enrolment and other fee....
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....tner in accordance with section 15 of the CGST Act which includes administration fee, sourcing fee, enrolment fee and the following reimbursements:- a. monthly stipend paid to trainees on behalf of Industry partner b. Cost of medical and accident insurance obtained for benefit of the Trainees and reimbursed by Industry partner. 4.10 However, the Applicant is of the view that the reimbursement received towards stipend and cost of medical and accident insurance is an expenditure or costs incurred as a pure agent of the Industry partner (recipient of supply) as per rule 33 of the CGST Rules 2017. Therefore, such reimbursements should be excluded from the taxable value and hence, GST should not be charged on such reimbursements. 4.11 Considering the aforesaid facts, the Applicant seeks to obtain a ruling with regard to the questions of law and thus files the instant application. 5. Applicant's Interpretation of Law : The applicant furnishes their interpretation of law, in respect of the questions on which advance ruling has been sought, as under: 5.1 The Applicant contends that they are acting as pure agent of the Industry partner in as far as providin....
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....ier who receives the subsidy (3) The value of the supply shall not include any discount which is given,- (a) Before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and (b) After the supply has been effected, if,- (i) Such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and (ii) Input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply (4) Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed (5) Notwithstanding anything contained in sub-section (1) or sub-section (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed." [Emphasis supplied] 5.3 It is clear from the plain reading of section 15 that KGST is leviable on the transaction value if it ....
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.... 5.6 From above, it is clear that any cost or expenditure incurred by supplier on behalf of the recipient of service shall be excluded from the value of supply u/s 15 of the KG ST Act if the conditions prescribed under Rule 33 are satisfied. However, in case, any cost or expenditure is incurred by supplier on its own account for provision of supply, then such cost or expenditure shall form part of the value of supply. 5.7 In the present case, in order to determine the taxability of various amounts charged by the Applicant from the Industry partner, we need to first evaluate the relevant terms of the agreement which is provided below: Para reference Particulars as per training agreement Clause 2 SCOPE OF TRAINING Clause 2.1 Subject to the terms of this Agreement, the Company is hereby registered by TeamLease as Training partner in accordance with NEEM Regulations. The Trainees shall under no circumstance be deemed to be the employees of the Company or of TeamLease Clause 2.2 The Company shall be solely responsible for providing adequate facilities in accordance with the NEEM Regulations or as maybe deemed appropriate by TeamLease for the Training, from ti....
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....yment of Trainees for the Training Towards services provided by Applicant on its own Sourcing fee One-time charge towards sourcing of Trainees Towards services provided by Applicant on its own Enrolment fee Fee towards enrolment of Trainees for various courses Towards services provided by Applicant on its own Stipend Paid to Trainees on behalf of Industry partner in accordance with NEEM Regulations Payment made on behalf of Industry partner Cost of medical and accident insurance Insurance obtained for the benefit of trainees and reimbursed by Industry partner Payment made on behalf of Industry partner 5.9 From above, the reimbursement received form Industry partner towards stipend paid to Trainees and the cost of medical and accident insurance would be eligible for deduction from the transaction value since such expenditure are incurred purely on behalf of Industry partner, provided the relevant conditions prescribed under Rule 33 of the KGST Rules, 2017 gets satisfied. 5.10 Further, GST would be payable only on the fee towards administration, sourcing of trainees and enrolment. 5.11 In this regard, the Applicant has drawn below the c....
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....) and DWS - TEAMLEASE will facilitate to enrol trainees under various courses like Bachelor of Management Studies (BMS), etc. and Rs. 500/- shall be borne by the Company. DWS shall be implemented for attendance and leave management. " Meaning of Pure Agent: (a) Enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; Clause 3: As depicted in Sr (i) above (b) Neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply; The Applicant is only a conduit for the payment and the actual service is provided by the Trainees to the Industry partner and the Industry partner is liable to make the payment of consideration (c) Does not use for his own interest such goods or services so procured; and The applicant is providing services as per NEEM regulations. Further, the applicant doesn't retain any portion of the stipend and insurance premium. It is merely acting as an intermediary of the Industry partner. (d) Receives only the actual amount incurred to procure....
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....he above rationale has also affirmed by the Hon hie Authority for Advance Ruling, Maharashtra in similar case of M/s. YASHASWI ACADEMY FOR SKILLS (2021 (8) TMI 1018) where the Hon hie Authority has held that the reimbursement by Industry Partner to the applicant, of the stipend paid to the trainees, does not attract tax under the GST Acts. The relevant extract of the judgement is reproduced below:- "5.10 we find that, the applicant, is registered as Agent under National Employability Enhancement Mission ("NEEM") for facilitating and extending support for mobilizing trainees under NEEM Scheme of Government of India as per regulations under notification issued by All India Council for Technical Education (AICTE), for providing trainees on-the-job practical training in industries to enhance their future employ ability, For that purpose, or which they enter into agreements with various companies/ organizations (called as industry partner) who impart actual practical training to the students. The applicant, in lieu of agreements with the industry partners, is engaged in preparing monthly attendance record of the trainees, getting it certified from the Company; processing sti....
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....ents is reproduced below: "6.3 Regarding the issue of taxation of stipend, the company which is providing on the job training to the trainees is required to pay the stipend to the trainees and the applicant is only acting as an intermediary in collecting the same from the trainer companies to the students. The service is provided by the trainees to the trainer as the trainer is liable to make payment of the consideration. This consideration is paid through the applicant and the applicant is not allowed to make any dedications in that amount. Hence the applicant is only a conduit for the payment and the actual service is by the trainee to the trainer. Therefore this amount is not taxable in the hands of the applicant. 6.5 Regarding the third issue of payment of Group Insurance and Workmen compensation scheme is made by the applicant with the trainee being beneficiary. If any tax is liable on this transaction, it shall be collected by the insurance company, and the insurance company would be the service provider and the applicant will be the service recipient. It the same is reimbursed to the applicant by the trainer company as per the terms of the contract, this am....
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.... thus to fulfill the obligations, the applicant charges Administration Fee, Sourcing Fee, Enrollment Fee, Reimbursement of monthly stipend paid to trainees on behalf of Industry partner and Reimbursement of cost of medical and accident insurance obtained for welfare of trainees as agreed by the Industry Partner. 10. The applicant, though collecting GST on the entire transaction value including the reimbursement amounts, is of the view that the reimbursement received towards stipend and cost of medical & accident insurance is an expenditure or cost incurred as pure agent of the Industry Partner as per rule 33 of the CGST Rules 2017 and therefore such reimbursements should be excluded from the taxable value and hence GST should not be charged on such reimbursements. Thus the applicant sought advance ruling in respect of the said issue in two questions. 11. In view of the above, we proceed to examine whether the applicant qualify to be a pure agent of the Industry Partner or not. In this regard, we invite reference to rule 33 of the CGST Rules 2017, which is as under:- 33. Value of supply of services in case of pure agent.-Notwithstanding anything contained in the provi....
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....end to the trainees and also towards the medical and accident insurance of the trainees on or before 2nd day of each calendar month", from which it is clearly evident that the applicant is not incurring the said amount initially and latter claiming the said amount by raising an invoice. Further the applicant also has not furnished any documentary evidence wherein the Industry Partner has authorised the applicant to make the payment to third party and later to claim the actual amounts. Thus even on this account also the applicant is not fulfilling the required condition. 14. Further the applicant were requested to furnish the copy of agreement entered between the trainee and the applicant, but furnished the copies of Course Registration Letters, addressed to two different trainees by email dated 28.01.2021. Clause 17 of the said letter stipulates that "The stipend for a particular month shall be paid on or before the 10th of the following month", which clearly indicates that the applicant receives the stipend amount from the Industry partner by 2nd of the month and distributes / disburses the same by 10th of the month to the trainees. Thus it is proven beyond doubt that the appli....