TaxTMI 
TaxTMI 
2023 (6) TMI 828
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....0 of the Maharashtra GST Act, 2017 (hereinafter referred to as the 'MGST Act') by M/s. Beep Skills Foundation a Not-for-Profit company registered under Section 8 of the Companies Act, 2013, having its registered office at A-1. Miner Apartments, 1^st Floor, Plot No. 83. Law College Road. CTS No. 124/1. Erandwana, Pune-411004 (hereinafter referred to as 'the Appellant') against the advance Ruling No. GST-ARA-122/2019-20/B-54 dated 27.04.2022. The Appellant is registered under the CGST Act and MGST Act bearing GSTIN 27AAGCC6533K1ZF, effective from 01.04.2018, in the State of Maharashtra. 3. Brief Facts of the case 3.1 The Appellant was originally incorporated as M/s. CLR Skills Training Foundation and tiled application for ruling under same name. This name was changed on 25.06.2021 to M/s Firstbridge Skill Foundation, which was again changed on 27.07.2021 to its present name viz. M/s Beep Skills Foundation, which further changed on 8.10.2021 to M/s Beeup Skills Foundation. 3.2 With an objective to offer on the job practical training to enhance employability of a person either pursuing his or her Post Graduation/ graduation/diploma in any technical or non-technical stream or h....
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.... to register as NEEM Facilitator, applied for and granted registration as NEEM Facilitator by AICTE vide Letter bearing F. No.1-3173947111/ NEEM/CLRSTF/2016 dated 15.03.2018. 3.9 Before initiation of training under NEEM, a NEEM Trainee must first enrol himself with the Appellant by signing a contract letter in the format prescribed in Annexure-II to AICTE (NEEM) Regulations. The contract letter is neither an offer of employment nor a guarantee of employment. As per letter, if contract is terminated because of failure on the part of NEEM Trainee, Trainee shall refund to the NEEM Facilitator as cost of training such amount as determined by the NEEM Facilitator. 3.10 The Appellant has further partnered with various companies/ industries who are desirous of registering themselves with the Appellant under AICTE (NEEM) Regulations as NEEM Trainer for deployment of NEEM Trainees and facilitation of their on job training. Appellant submitted specimen copies of the Training Collaboration Agreement dated 07.03.2019 entered between the Appellant and LG Electronics India Private Limited (for brevity called as LG) and the Training Services Agreement dated 12.02.2019 between the Appellant ....
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....gulations or as deemed appropriate by the Appellant for the training. (ix) The appellant shall ensure to issue Tax Invoice as per GST Rules. In the event of failure to discharge correct GST liability, the appellant will be liable to pay GST. (x) The Trainer shall ensure that the personnel providing the training are fully competent and qualified to provide the training, shall observe the health, welfare and safety standards during the training. (xi) The appellant shall pay stipend to the Trainees engaged by the company. Pay to the Appellant by the 2nd of every month, a consolidated amount as monthly stipend in consideration for the deployment of the trainees which is to be utilized by the Appellant solely for the purpose of paying the trainees. (xii) The company shall convene periodic meetings with the Appellant to discuss issues concerning areas for improving the training. (xiii) The company shall not initiate disciplinary proceedings against any trainee without intimation to the Appellant. (xiv) The Trainer shall notify the Appellant in writing if it is desirous of offering employment to any trainee during or after the completi....
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....tant clauses of the AICTE (NEEM) Regulations are: 7.3 NEEM Facilitator can terminate the Training contract with the NEEM trainee on account of any unlawful behaviour on the part of the NEEM trainee or on account of repeated flouting of company / Industry policies or for continuous irregularity in attending to the scheduled training as notified for the NEEM trainee. 7.4 NEEM trainee can terminate the contract entered into with the NEEM Facilitator where the NEEM Facilitator fails to honour any of the terms of the contract by giving a written notice 30 days in advance to the NEEM Facilitator. 7.5 The selection of a NEEM trainee does not constitute an employment contract with NEEM. Facilitator or the company/industry where the NEEM trainee is placed for training under the contract. 10.1 NEEM Facilitator shall comply with the necessary provisions and the applicable Acts, to ensure welfare, safety and health aspects of the trainees while they undergo training. 12.0 NEEM FACILITATOR'S LIABILITY FOR COMPENSATION FOR INJURY 12.1 lf personal injury is caused to a NEEM trainee, by Incident/accident arising out of and in the course of his ....
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.... Advance Ruling"), passed following order: Question: Whether the reimbursement amount received by the Applicant from Trainer towards "Stipend and other expenses incurred by the Applicant in accordance with AICTE (NEEM) Regulations to ensure wealth safety and health of NEEM Trainees" Is in the capacity of pure agent and hence not includible in the value of taxable supply made by the Applicant to Trainer for the purpose of payment of Goods and Service Tax ("GST")? Answer: Not answered in view of discussions made above. 3.16 It was, inter alia, held and observed in the impugned advance ruling that: "5.3.1.2 We first of all observe that the agreement is not signed by LG and therefore the validity of the said agreement is in question and in doubt. Further, we also seen that, as per Clause 4 of the agreement mentioned above, the said agreement has expired on 29.02.2020 and therefore not valid after the said date and even if the contents of the said agreement are taken into account, notwithstanding the invalidity of the same due to absence of signatures of relevant parties to it, it would appear that the supply under the said agreement had been completed even....
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....ion. 4.2 Validity of the contract between the Appellant and LG: It was submitted that the validity of the contract was not the subject matter of dispute before the learned AAR. It is for the parties to determine whether the contract is valid or not. Since, the Appellant has provided services under said contract and also received payment from LG for providing the said services, it is submitted that the agreement was valid and genuine. Even the revenue has not raised any objection in relation to the contract between the Appellant and LG. The revenue has further accepted the GST paid by the Appellant in relation to services provided and invoices raised under the said contract. 4.2.1 The appellant termed finding that the said contract has already expired even before the date of filing of the application as irrelevant. The Appellant stated that he had sought advance ruling in relation to a particular business and not in relation to a particular contract. He stressed that the business was ongoing and carried on by the Appellant on the date of making the advance ruling application. 4.2.2 It was submitted that the AAR has erred in giving a very narrow meaning to Section 95 of the ....
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....ich is to act as a guardian of the NEEM Trainee. 4.4 Without prejudice to above and in any event, even assuming without admitting that the clauses of the agreement were contradictory. the appellant submitted that the AAR was under an obligation to provide an advance ruling in relation to the questions posed by the Appellant. As per appellant, on the basis of the clauses of the agreement, even if contradictory, the Appellant would have been provided a clear answer on its liability to pay GST on the reimbursement amount received from NEEM Trainer towards "Stipend and other expenses incurred by the Appellant in accordance with AICTE (NEEM) Regulations to ensure wealth, safety and health of NEEM Trainees". 4.5 Without prejudice to above and in any event, it was submitted that the AAR never put the Appellant to the notice that it is of the view that the documents furnished by the Appellant were incomplete and inconclusive and it cannot answer the question raised on the basis of the said documents. It was further submitted that the impugned advance ruling passed by the AAR is in violation of the principles of natural justice. He invited our attention to the second proviso to Sectio....
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....Appellant for the Workmen Compensation Policy and / or Group Health Insurance Policy taken to ensure wealth, safety and health of NEEM Trainees. It was added that the beneficiary of the policy taken by the Appellant are NEEM Trainees in line with the requirement of AICTE (NEEM) Regulations. 4.8.3 It was claimed that the reimbursement amount received by the Appellant from NEEM Trainer towards "Stipend and other expenses incurred by the Appellant on NEEM Trainees in accordance with AICTE (NEEM) Regulations" is in the capacity of pure agent u/r 33 of the CGST Rules, which shall be excluded from the value of supply. 4.8.4 The Appellant claimed that it satisfies all the criteria prescribed under Rule 33 of the CGST Rules to qualify as "pure agent" in as much as: (i) The NEEM Trainer has engaged NEEM Trainees and authorized the Appellant to pay them the stipend and incur other expenses for their wealth, safety and health. The service to NEEM Trainer is provided by NEEM Trainees. (ii) The stipend amount and other expenses incurred by the Appellant on NEEM Trainees towards their wealth, safety and health are agreed in the agreement and also indicated separately in t....
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....cal reasons. The Appellant submitted that the ratio laid down in both the above Advance Ruling is squarely applicable to the present case. 4.9.5 Appellant also took support of the AAR in the case of Asiatic Clinical Research and further supported by the decision of the Hon'ble Tribunal in the case of Rolex Logistics Pvt. Ltd. v/s. Commissioner of Service Tax, Bangalore [2009 (13) S.T.R. 147 (Tri.-Bang.)], wherein, the Hon'ble Tribunal has held that reimbursement of payments made on behalf of service recipient are not includible in the value of service provided by the service provider. 4.10 In view of the above, appellant submitted that, the reimbursement of "Stipend amount and other expenses incurred by the Appellant in accordance with AICTE (NEEM) Regulations to ensure wealth, safety and health of NEEM Trainees" from NEEM Trainer is in the capacity of a pure agent and hence, not required to include the same in the value of taxable supply made by the Appellant to NEEM Trainer for the purpose of payment of GST. 5. PERSONAL HEARING AND ADDITIONAL SUBMISSION 5.1 In terms of section 101 (1) of the CGST Act, 2017, the appellant was given personal hearing on 28.02.2023. Shri ....
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....ibunal in the case of Kiran Gems Pvt. Ltd. v/s. Commissioner of Central Excise & S.T., Surat-I reported in 2019 (25) G.S.T.L . 62 (Tri. - Ahmd.) wherein the Hon'ble Tribunal has held that the actual electricity charges recovered as pure agent from tenant shall not form part of the value of service of renting of immovable property service. It is stated that above contention is also supported by the judgment of the Hon'ble Bombay High Court in the case of Commissioner of S.T.. Mumbai-VI v/s. Shri Krishna Chaitanya Enterprises reported in 2018 (14) G.S.T.L. 533 (Bom.) The issue before the Hon'ble High Court was whether service tax would be applicable on maintenance charges collected by builder for up-keep of the apartment or premises before formation of co-operative society. 5.2.6. It was submitted that provisions pertaining to "pure agent" under GST are in pari materia with service tax and therefore. he contended that the above case law applies squarely to the present case. 5.2.7. In view of the above. it was submitted that, as a NEEM Facilitator, the appellant is satisfying all the conditions of a "pure agent" and therefore, he is not liable to GST on the reimbursement of the ....
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....are in addition to the services he supplies on his own account. Explanation.- For the purposes of this rule, the expression "pure agent" means a person who- (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; (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; (c) does not use for his own interest such goods or services so procured; and (d) only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. Illustration- Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to the Registrar of Companies. The fees charged by the Registrar of Companies for the registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the ....
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.... third party as a Pure Agent of the recipient are in addition to the services, he (Pure Agent) supplies on his own. In this case, appellant's supply of providing trainees to the industry is only one supply and their sourcing, administrative work, insuring them is an incidental work and not as another supply. In other words, to comply with the condition of this clause. supply by the appellant in the capacity of pure agent should be additional supply. On the contrary. in this case, provision of NEEM Trainees is a dominant part of business and activities like NEEM Trainee sourcing, etc are allied and dependent works. Therefore, other than deployment of trainees as per the NEEM Regulations, no other service is supplied by the Appellant. Thus, on this count also, the appellant is not fulfilling the prescribed conditions in rule 33. In fact there won't be any service if the dominant service of provision of trainees is removed. Additional supply may not be necessary For fulfilling the main dominant supply. However, in the present case, the provision of NEEM Trainees cannot be treated as additional supply because, as stated above, its absence makes the remaining transaction unenforceable. ....
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.... to the NEEM Trainees was on his own and not on the behalf of the NEEM Trainer. The appellant, as per NEEM Regulations, has the sole responsibility to engage NEEM Trainees and supply them to Trainer under separate agreements. 6.8 As per Annexure B, GST of Rs 2389/- is calculated @ 18% on the total billing amount of Rs 13271/- per head per month. Breakup of 13271/- is - Stipend of Rs. 12271/- with other benefits of Rs 280/- (WC Policy, uniform, safety shoes charges) and appellant's management fees of Rs 720/-. This shows that GST is pre-decided to be collected, as per the agreement, on the gross value including on stipend. 6.9 A perusal of sample invoices attached (Tax Invoice No SADEL000055/1920 DT 25.11.2019 for Nov 2019 raised on LGEIPL for Rs. 113024 + IGST of Rs 20344.32 and Tax Invoice No SAKAR000107/1920 DT 26.11.2019 for 21.10.2019-20.11.2019 raised on IEIPL for Rs 539907 + IGST of Rs 97183.26) shows that GST is separately collected on entire billed amount by the appellant from both Trainers. 6.10 As per terms of para 3 and para 5.1 (xiii) of the agreement with LG, stipend will be paid by company / NEEM Trainer to the appellant and by the appellant to the NEEM Train....
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....y which shall be at par with the prescribed minimum wages payable for unskilled category under Shops & Establishment Act....." This makes it clear that it is the Appellant who is obligated to pay the stipend to the trainees. Since the trainee has registered with the Appellant/NEEM Facilitator, it is the responsibility of the Appellant to deploy the trainee in a suitable industry to undergo training at the industry for a specific period and pay the stipend during the training period. The discussion cited above makes it ample clear that it is the appellant, who is directly responsible to pay stipend to the NEEM Trainees and there is no authorisation by the NEEM Trainer to patstipend on the behalf of the Trainer. We therefore, find that the Appellant fails to satisfy condition (i) of Rule 33. 6.14 We also find that Appellant fails to satisfy the 3rd condition of Rule 33 i.e. 'the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account." We find from the agreement with the industry partner that, other than deployment of trainees as per the NEEM Regulations, no other service is ....
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....iling which the Appellant faces the risk of having his NEEM Facilitator registration revoked. No doubt the terms of the agreement with the Company specify that the stipend amount paid to the Appellant is to be utilized only for the purpose of paying the trainees, but this does not make the Appellant a pure agent of the Company since the NEEM Regulations does not require the Company/Industry to pay a stipend to the trainees. Therefore, the Appellant does not satisfy clause (c) of the definition of 'pure agent' as given in the explanation to Rule 33. 6.16 The Appellant had drawn our attention to the Maharashtra Authority for Advance Ruling given in the case of Yashswi Academy for Skills. Attention has also been invited to the ruling given by the Karnataka Authority for Advance Ruling in the case of Cadmaxx Solutions Education Trust. In these AARs, it has been held that the stipend amount required to be paid by the trainer to the trainee, which is paid through the applicant (a NEEM Facilitator) is not taxable in the hands of the applicant since the applicant is only acting as a pure agent. We have gone through the said rulings and find that in these cases. the Authorities have not ....