2021 (8) TMI 1017 - AAR - GST

Levy of GST - reimbursement by Industry Partner to YAS of the stipend paid to students - HELD THAT - The applicant, is empanelled with the Ministry of Skill Development and Entrepreneurship, as a Third Party aggregator for mobilizing the trainees under National Apprenticeship Promotion Scheme (NAPS) for providing them on-the-job practical training in various industries, for which they enter into agreements with various companies/ organizations (called as industry partner) who impart actual practical training to the students. The issue in respect of stipend paid to the trainees by the applicant, the industry partner that provides training to the trainees is required to pay stipend to the trainees. This stipend is not directly paid to the trainees by the companies, rather the same are routed through the applicant. The applicant has submitted that the entire amounts received as stipend from the companies are paid to the trainees without any amount being retained. Thus, the applicant is only acting as an intermediary in collecting the stipend from the companies and then disbursing the same to the trainees in full since the applicant is not allowed to make any deductions from the stipend before disbursing the same to the trainees. The applicant is only a conduit for the payment of stipend and the actual service is supplied by the trainees to the trainer companies (industry partners) against which stipend is payable. Hence the amount of stipend received by the applicant from the industry partners and paid in full to the trainees is not taxable at the hands of the applicant. The reimbursement by Industry Partner to the applicant (YAS), of the stipend paid to the trainees, does not attract tax under the GST Acts.

Summary

Issues Involved:
1. Whether the reimbursement by Industry Partner to YAS of the stipend paid to students attracts GST?
2. Whether the reimbursement by Industry Partner to YAS of the insurance premium attracts GST?
3. Whether the reimbursement by Industry Partner to YAS of the expenses for uniform and safety shoes attracts GST?

Detailed Analysis:

1. Reimbursement of Stipend:
The applicant, Yashaswi Academy for Skills (YAS), is registered as a 'not for Profit Company' and acts as a Third Party Aggregator under the Apprentice Act 1961. YAS enters into agreements with industry partners to provide on-the-job training to apprentices. The industry partners are required to pay stipends to the apprentices, which are routed through YAS. YAS prepares the monthly attendance, processes, and disburses the stipends to the apprentices' bank accounts without making any deductions. The applicant argues that they act as a pure agent for the industry partner, and the stipend reimbursement should not attract GST.

The Authority for Advance Ruling (AAR) concluded that YAS acts merely as a conduit for the stipend payments. The service is provided by the trainees to the industry partners, and YAS is not allowed to retain any part of the stipend. Therefore, the reimbursement by the industry partner to YAS of the stipend paid to students does not attract GST.

2. Reimbursement of Insurance Premium:
The applicant initially sought a ruling on whether the reimbursement of insurance premiums paid for Employee Compensation and Personal Accident policies attracts GST. YAS takes out these insurance policies in the name of the trainees and the industry partner. The applicant argued that if any tax is liable, it should be collected by the insurance company, and the reimbursement to YAS should not be taxable.

However, during the proceedings, the applicant withdrew this question. Therefore, the AAR did not provide a ruling on this issue.

3. Reimbursement of Expenses for Uniform and Safety Shoes:
YAS also sought a ruling on whether the reimbursement of expenses for uniforms and safety shoes provided to trainees attracts GST. These items are purchased by YAS as per the requirements of the industry partners. The applicant argued that they act as a pure agent and the reimbursement should not be taxable.

Similar to the insurance premium issue, the applicant withdrew this question during the proceedings. Consequently, the AAR did not provide a ruling on this issue.

Conclusion:
The AAR ruled that the reimbursement by the industry partner to YAS of the stipend paid to students does not attract GST. The questions regarding the reimbursement of insurance premiums and expenses for uniforms and safety shoes were withdrawn by the applicant and hence were not addressed by the AAR.