TMI Blog2022 (3) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... ant, 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. Whether the applicant qualify to be a pure agent of the Industry Partner or not? - HELD THAT:- A pure agent would be a person (supplier i.e. applicant in this case) who enters into a contractual agreement with the recipient of supply (Industry partner in this case) to act as recipient's pure agent to incur expenditure or costs, in the course of supply of goods or services or both. It is an admitted fact that the applicant herein is raising invoice for stipend and insurance cost and distributes the same to the trainees on receipt of the said amount and also not furnished any contractual agreement to incur expenditure first and to claim the said amounts later. Thus the applicant does not qualify to be a pure agent at all, in terms of ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore 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 reimbursement is not chargeable to GST? 4. BRIEF FACTS OF THE CASE: The applicant furnishes the following relevant facts having a bearing on the questions on which advance ruling has been sought. 4.1 TeamLease Education Foundation (hereinafter referred as Applicant' or 'TLEF') is a section 25 company, registered under the provisions of the Companies Act, 1956, engaged in charitable activities and obtained registration under section 12AA of the Income Tax Act 1961, 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 technolog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 charged by Applicant towards the services provided in its own account e. Ensure health, welfare and safety standards during the training and compliance with other terms and conditions as per the agreement. 4.6 The applicant is entrusted with the following obligations as per the training agreement:- a. To execute an agreement with each trainee, prior to deploying the Trainees to the Industry partner for the Training In accordance with NEEM Regulations. b. Furnish appropriate data to the Industry partner in relation to the Trainees. c. Undertake administrative tasks as may be required from time to time. d. Implementation of digit workforce solution (DWS) for attendance and leave management of Trainees. e. Assistance in enrolment of Trainees under various courses like Bachelor of Management St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant 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 providing stipend and incurring cost of insurance and submits the following in their support. Section 9(1) of the KGST Act prescribes the levy and collection of the Karnataka State Goods and Services Tax which states that, Subject to the provisions of sub-section (2), there shall be levied a tax called the Karnataka State goods and services tax on all intra-state supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. 5.2 Thus, KGST is levied on the value of supply determined under section 15 of the KGST Act. Now, as per section 15 of the KGST Act:- (1) The value of a suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified 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 satisfies the following conditions:- a. Transaction value should be the price paid or payable for the said supply b. The supplier and recipient of the supply are not related c. Price should be the sole consideration for the supply Further, the transaction value shall include the incidental expenses incurred by the supplier on its own in relation to supply of goods or services or both. 5.4 However, in case, the aforesaid conditions of section 15(1) are not fulfilled, then the value of taxable supply is determined by virtue of section 15(4) which has prescribed Chapter IV of the KGST Rules, 2017 containing various rules (Rule 27 to Rule 35) for determination of value of supply in certain cases. 5.5 One of the such case is determination of value of supply of services in case of pure agent as envisaged under Rule 33 of the KGST Rules which prescribes the following: Notwithstanding anything contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 time to time Clause 3 STIPEND In consideration of dedicated deployment of the Trainees to the company in accordance with this Agreement, the Company shall pay a monthly stipend ( Stipend ) in the Bank Account as detailed in Annexure B, to be utilized by TEAMLEASE solely for the purposes of paying the Trainees in accordance with the NEEM Regulations. Which shall be equal to or greater than the prescribed minimum wages for unskilled category under applicable law and employee compensation insurance premium on or before the [2nd] day of each calendar month. For the avoidance of doubt it is clarified that the Stipend payable shall be a single consolidated amount and shall not be subject to further withholding tax, namely Tax Deducted at Source or any other statutory deductions or payments, except for i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 comparative analysis of relevant conditions prescribed under Rule 33 and the relevant terms forming part of training agreement: Conditions prescribed under Rule 33 of the KGST Rules Reference from the training agreement Conditions for pure agent; (i) The supplier acts as a pure agent of the recipient of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 such goods or services in addition to the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 stipends of the trai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced 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 amounts to reimbursement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, 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 provisions of this Chapter, the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccident 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 applicant is not incurring the expenditure towards th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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