TMI Blog2022 (3) TMI 1088X X X X Extracts X X X X X X X X Extracts X X X X ..... F submits that it receives only the actual amount incurred to pay stipend amount to the Trainees, in addition to the amount it receives for supplies provided on its own account. Insurance - HELD THAT:- The said single Insurance policy was taken by TLEF for both the trainees as well as its employees. Further, we note that said ICICI Tax invoice dated 1-8-21 of ₹ 191309.86/- is total Insurance premium amount charged by Insurance company on TLEF for both trainees and its (TLEF) employees. TLEF is unable to co-relate the actual Insurance premium amount paid by it to the Insurance company exclusively for the trainees only, vis-a-vis the amount charged by it, as reimbursement, on Industry Partner. TLEF has failed to satisfy that it is pure agent, by not substantiating on record that it receives only the actual amount from Industry Partner for insurance charges incurred by it exclusively for Trainees - The facts of present case is that TLEF is unable to substantiate that the insurance amount it has charged on Industry Recipient in its Invoices was the actual reimbursement of Insurance charges, exclusively, incurred for trainees - TLEF is not pure agent of Industry partner fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted. The said agreement has been originally entered between Industry partner, TLEF and Team Lease Skills University (TLSU) dated 25 June 2018 wherein the Applicant was acting as the sponsor of TLSU for implementation and operationalization of training program under the NEEM Regulation through TLSU. However, vide assignment of agreement dated 15 September 2021 TLSU has assigned all its obligations and rights to TLEF. 5. It is submitted that as per the training agreement, the Industry partner 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 enrollment and other fee charged by Applicant towards the services provided in its own accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance 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 reimbursement should be excluded from the taxable value and hence, GST should not be charged on such reimbursements. 7. TLEF submits that it is acting as pure agent of the Industry partner in as far as providing stipend and incurring cost of insurance: 7.1 It is submitted that Section 9(1) of the GGST Act prescribes the levy and collection of the Gujarat State Goods and Services Tax which states that, Subject to the provisions of sub- section (2), there shall be levied a tax called the Gujarat 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. 7.2 Thus, GGST is levied on the value of supply determined under section 15 of the GGST Act. Now, as per section 15 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (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] 7.3 TLEF has submitted that it is clear from the plain reading of section 15 that CGST 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. 7.4 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 under Chapter IV of the CGST Rules, 2017 containing various rules (Rule 27 to Rule 35) for determination of value of supply in certain cases. 7.5 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 GGST Rules which pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining partner in accordance with NEEM Regulations. The Trainees shall under no circumstance be deemed to be the employees of the Company or of TLSU/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 ) to TLSU to be utilized by TLSU 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 receiving payment from the company for each calendar month based on the payment terms mentioned in Annexure- B. 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 De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner 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 7.9 From above, TLEF submits that the reimbursement received from 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 GGST Rules, 2017 gets satisfied. 7.10 Further, GST would be payable only on the fee towards administration, sourcing of trainees and absorption of trainees. 7.11 In this regard, TLEF submits: Conditions Prescribed under Rule 33 of GGST Rules Reference from the training agreement Conditions for Pure Agent i) the supplier acts as a pure agent of the recipient of the supply, when he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 amount received for supply he provides on his own account. The applicant is recovering actual amount of stipend paid to Trainees and cost of medical and accident insurance from the Industry partner. Further, Applicant is separately charging fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 employability, For that purpose, for 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 trainees ; making payment of stipend to the trainees ; providing uniform and safety shoes to the trainees ; taking Insurance policies for trainees towards Employee Compensation and Person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 deductions 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. If the same is reimbursed to the applicant by the trainer company as per the terms of the contract, this amounts to reimbursement of the premium paid and hence this amount reimbursed would not be taxable in the hands of the applicant. 7.18 TLEF submits: TLEF is acting as a pure agent of the Industry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) 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. 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) receives 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject case. 17. We note that TLEF cited two Advance Rulings pertaining to Yashaswi Academy and Cadmaxx Solution. The facts of these cases are that insurance amount of said parties was reimbursed. What is inferred from the facts of cited cases is that of actual reimbursement. The facts of present case before us is that TLEF is unable to substantiate that the insurance amount it has charged on Industry Recipient in its Invoices was the actual reimbursement of Insurance charges, exclusively, incurred for trainees. Thus the said two cases cited are of no avail. Also, we refer to Section 103 CGST Act, wherein any Advance Ruling is binding on the Applicant who has sought it and on the concerned jurisdictional officer in respect of the Applicant. 18. In conspectus of aforementioned findings, we issue the Ruling: Ruling 1. TLEF is pure agent of Industry Partner to the extent of reimbursement of the actual amount Stipend incurred by it and thereby said reimbursement amount is not leviable to GST. 2. TLEF is not pure agent of Industry partner for Insurance premium amount, as TLEF does not satisfy clause (d) to the explanation of Rule 33 CGST Rules. Thereby, insurance am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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