TMI Blog2022 (7) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... one which is compulsorily levied on the recipient of service, but has been paid by the supplier of service to the third party on behalf of the recipient and is claimed as a reimbursement from the recipient at actuals. The Appellant's case does not fit into the above understanding of pure agent. In this case, the Appellant is providing the service of deploying trainees to the Company as per the NEEM Regulations. However, it is the Appellant who is obligated under the NEEM Regulations to pay the stipend to the trainees. Regulation 15 of the NEEM Regulations as well as the terms of the contract entered into with the NEEM Trainee stipulate that it is the Appellant who will pay the stipend to the trainee. Since the trainee has registered with the Appellant as 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. Merely because the Appellant is getting the stipend amount reimbursed from the Company, will not make the Appellant a pure agent of the Company. The activity of deploying trainees to the Company to undergo trainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the KGST Act. 2. The present appeal has been filed under section 100 of the Central Goods and Service Tax Act 2017 and Karnataka Goods and Service Tax Act 2017 (herein after referred to as CGST Act, 2017 and SGST Act, 2017) by M/s Teamlease Education Foundation, 6th Floor, BMTC Commercial Complex, 80 Ft Road, Koramangala, Bengaluru, 560095 (herein after referred to as Appellant) against the Advance Ruling order No. KAR ADRG 07/2022 dated 8th March 2022. Brief Facts of the case: 3. The Appellant is an approved NEEM (National Employability Enhancement Mission) Facilitator under the All India Council for Technical Education (NEEM) Regulations, 2017. The objective of NEEM is to offer on the job practical training to enhance employability of a person pursuing Post-Graduate/Graduate/Diploma in any technical or non-technical stream or a person who has discontinued studies after class 10. As per NEEM Regulations, a person registered for receiving training is called a Trainee. A contract is required to be executed between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore the said reimbursement is chargeable t GST. The Applicant does not qualify to be 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 chargeable to GST. 6. Aggrieved by the ruling given by the AAR on the issue of reimbursement of stipend paid to the trainees on behalf of the industry partner, the Appellant has filed this appeal on the following grounds. 6.1. A reading of Rule 33 of the CGST Rules makes it clear that any cost or expenditure incurred by the supplier on behalf of the recipient of service shall be excluded from the value of supply under Section 15 of the CGST Act, if the conditions prescribed under Rule 33 are satisfied. In the present case, the impugned order has misconstrued the provisions of Rule 33 to add a restriction that expenditure must be incurred first and only claimed later, to qualify as a pure agent. The Appellant submitted that the first condition under Rule 33 that, the supplier acts as a pure age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the Appellant has not furnished any information with regard to procurement of supplies from the third party; that the impugned order has made no findings on this submission by the Appellant and is therefore, non-speaking to this extent. 6.3. The Appellant submitted that they fulfil the definition of the expression 'pure agent' which has been given in the explanation to Rule 33; that the Appellant 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; that the Appellant is providing services as per NEEM regulations and does not retain any portion of the stipend or receive any separate consideration from Trainees; that it is merely acting as an intermediary of the industry partner; that the Appellant is recovering actual amount of stipend paid to trainees from industry partner and separately charging fee for administration, sourcing and enrolment towards the services provided on its own account, on which GST is charged. Therefore, it is clear that the reimbursement received from the industry towards the stipend paid to trainees is in the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various industry partners for imparting training to the trainees; that the Appellant executes an agreement with each trainee as per which the Appellant is entrusted with the task of deploying the trainee to the industry partner, assist the trainee in enrolment under various courses, pay premiums towards the medical and accident insurance obtained for the trainees and pay the stipend to the trainees engaged by the industry partner. The Appellant charges the industry partner an administration fee, sourcing fee, enrolment fee as well as claims reimbursement of monthly stipend paid to the trainees and reimbursement of cost of medical and accident insurance obtained for welfare of trainees. The Advocate submitted that the reimbursement received towards stipend is an expenditure incurred as a pure agent of the industry partner as per Rule 33 of the CGST Rules; that the Appellant is merely a conduit for the payment of stipend and the actual service is supplied by the trainees to the industry partner and such reimbursement of stipend should be excluded from the taxable value for payment of GST; that the AAR has misconstrued the provisions of Rule 33 and added a restriction that expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e trainees without any withholding; that as per the agreement as well as the invoice, the amount towards stipend is separately indicated and hence only to the extent of stipend they operate as pure agent'. 7.5. The Advocate also drew attention to the ruling passed by the Gujarat Authority for Advance Ruling in their own case wherein it was held that the stipend reimbursed by the industry partner shall not form part of the taxable value in as much as they are pure agents. They also referred to rulings given by Karnataka AAR in the case of Cadmaxx Solutions Education Trust where on the same set of facts relating to NEEM Facilitator it was held that reimbursement of stipend is not chargeable to GST. The Advocated prayed that their appeal be allowed since they meet all the requirements of a 'pure agent' as laid down in Rule 33 of CGST Rules. DISCUSSIONS AND FINDINGS 8. We have gone through the entire case records and considered the submissions made by the Appellant in their grounds of appeal, as well as the submissions made at the time of personal hearing. The limited issue for determination is whether the Appellant is acting as a 'pure agent' of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement to incur expenditure first and to claim the said amount later; that it is evident from the copy of the agreement entered into with M/s LG Electronics India Pvt Ltd and the course registration letters addressed to the trainee, that the stipend amount is paid by the industry partner to the Appellant by the 2nd of the month and the same is paid by the Appellant to the trainee on the 10th of the month. The lower Authority thus concluded that the Appellant is not incurring any expenditure initially and later claiming the said amount from the industry partner and hence the Appellant does not qualify to be a pure agent. 11. In their appeal before us, the Appellant has contended that the reimbursement received towards stipend is an expenditure incurred as a pure agent of the industry partner as per Rule 33 of the CGST Rules; that the Appellant is merely a conduit for the payment of stipend and the actual service is supplied by the trainees to the industry partner and such reimbursement of stipend should be excluded from the taxable value for payment of GST; that the AAR has misconstrued the provisions of Rule 33 and added a restriction that expenditure must be incurred first a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NEEM trainee and NEEM Facilitator. 7.2 Either party can terminate the contract by notifying in writing to the other party by giving a notice thirty days in advance. 7.3 NEEM Facilitator can terminate the Training contract with the NEEM trainee on account of any unlawful behavior 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. 9.0 PRACTICAL AND BASIC TRAINING OF NEEM TRAINEES 9.1 Each NEEM trainee shall be provided comprehensive training in the trade by deployment in the premises of an employer/company/industry or in field operations depending on the trade selected. 9.2 On the job tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AND WITHDRAWAL OF REGISTRATION AND APPROVAL 17.1 If a NEEM Facilitator contravenes any of the provisions of these Regulations, the AICTE may, after making such enquiry, as it may consider appropriate and after giving NEEM Facilitator an opportunity for being heard, revoke/withdraw the registration and approval granted to such NEEM Facilitator. 17.2 If the Registration and Approval of NEEM is revoked or withdrawn, the concerned NEEM Facilitator will not be eligible to apply for fresh registration for a period of at least 2 years from the date of such revocation or withdrawal. 18.0 VALIDITY OF REGISTRATION 18.1 The Registration is valid for three years from the date of issue of letter of Registration. The performance of the NEEM Facilitator will be reviewed every three years or at any time during the three year period as may be decided by the Council by the duly constituted committee for the purpose of extension of Registration or otherwise. This Clause would operate retrospective to all Facilitators. 12. A reading of the above NEEM Regulations makes it evident that the Appellant as a NEEM Facilitator is bound by the following responsibilities:- Moti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iding training as per the NEEM Regulations. The responsibilities of the Company as per the agreement are as follows:- Provide adequate facilities in accordance with the NEEM Regulations or as deemed appropriate by the Appellant for the training Ensure that the personnel providing the training are fully competent and qualified to provide the training Observe the health, welfare and safety standards during the training 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. Pay the Appellant administration fee of Rs 375/- per trainee per month which is the consideration for assisting the Company with the administrative tasks for deployment of trainees to the Company for training. Pay the Appellant a one-time sourcing fee of Rs 1000/- per candidate for sourcing the candidates. Implement Digital Workforce Solution (DWS) for attendance and leave management. Pay the Appellant Rs 500/- to enable the Appellant to enroll the trainees in various courses like Bachelor of Management ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his own account. Illustration . - Corporate services firm A is engaged to handle (he 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 payment of those fees. Therefore, A 's recovery of such expenses is a disbursement and not part of the value of supply made by A to B. 15. A reading of Rule 33 gives the understanding that a pure agent is one who, while making a supply to the recipient, also receives and incurs expenditure on some other supply on behalf of the recipient and claims reimbursement, at actuals, for such supplies from the recipient of the main supply. In other words, under the pure agent concept, the expenditure which is incurred by the supplier of service for procuring supplies from a third party for the recipient, in addition to his own supplies, is excluded from his value of supply since such expenditure is one which is compulsorily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that it has authorized the Appellant to make the payment to the trainees on behalf of the Company. We do not find any such authorization in the agreement. In fact, the obligations of the parties as mentioned in 5.1 (vii) of the agreement clearly states as follows: Teamlease shall pay stipend to the trainees engaged by Company which shall be at par with the prescribed minimum wages payable for unskilled category under Shops Establishment Act. However, if the trainees are trained on shop floors of manufacturing units, Mines, Refineries, Factories or any non-Shops Establishment process, Company shall notify Teamlease the list of locations as specified in Annexure A together with Industry classification as required under the Regulations where training shall be conducted to enable Teamlease to pay stipends to Trainees in line with the applicable minimum wages payable for unskilled category under the Factories Act. This clearly evidences that it is the Appellant who is obligated to pay the stipend to the trainees. We therefore, find that the Appellant fails to satisfy condition (i) of Rule 33. 17. We also find that Appellant fails to satisfy the 3rd condition of Rule 33 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the trainees registered with him to suitable industries to undergo practical on-the-job training and to pay them the monthly stipend failing 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. 19. The lower authority has held that the Appellant does not qualify as a pure agent for the reason that the Appellant is not incurring the cost of the stipend initially and later claiming the same from the Company. They have held that since the Company is paying the stipend amount to the Appellant on the 2nd of the month and the Appellant disburses the stipend to the trainees on the 10th of the month, no expenditure is incurred by the Appellant and the amount received cannot be termed as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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