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2022 (3) TMI 574 - AAR - GSTLevy of GST - reimbursement of expenses - Applicant is acting as a pure agent of the Industry partner to the extent of reimbursement received towards stipend paid to trainees on behalf of Industry partner as part of training agreement - 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 - HELD THAT - The applicant being an approved NEEM (National Employability Enhancement Mission) facilitator partner with various trainers and Employers/Company/Industry (industry partner) for imparting training to NEEM trainees. The applicant as well as the Industry partner have certain obligations as per the NEEM Regulations and thus to fulfill the obligations 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 - 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. 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 rule 33 of the CGST Rules 2017. Rule 33 (iii) of the CGST Rules 2017 stipulates that the applicant must procure certain supplies from the third party as a pure agent of the recipient of supply which are in addition to the services he supplies on his own account. In the instant case the applicant has not furnished any information with regard to procurement of supplies from the third party i.e. trainees. Thus the applicant is not fulfilling the required condition - the applicant does not qualify to be a pure agent and hence the GST is chargeable on the entire transaction value.
Issues Involved:
1. Whether the Applicant is acting as a pure agent of the Industry partner to the extent of reimbursement received towards stipend paid to trainees and therefore the said reimbursement is not chargeable to GST. 2. Whether the Applicant is acting as a pure agent of the Industry partner to the extent of reimbursement received against the cost of medical and accident insurance obtained for the benefit of trainees and therefore the said reimbursement is not chargeable to GST. Detailed Analysis: Issue 1: Reimbursement of Stipend The Applicant, a Section 25 company engaged in charitable activities, sought an advance ruling on whether the reimbursement received towards the stipend paid to trainees on behalf of the Industry partner is chargeable to GST. The Applicant argued that they act as a pure agent of the Industry partner as per Rule 33 of the CGST Rules 2017, and thus such reimbursements should be excluded from the taxable value. Applicant's Interpretation: The Applicant contended that: - They act as a pure agent by making payments on behalf of the Industry partner. - The stipend payments are separately indicated in the invoices. - The stipend payments are additional to the services provided on their own account. Authority's Findings: The Authority examined Rule 33 of the CGST Rules 2017, which defines the conditions for a pure agent: 1. The supplier must act as a pure agent of the recipient of the supply when making payments to third parties on authorization by the recipient. 2. The payments made must be separately indicated in the invoice. 3. The supplies procured must be in addition to the services supplied on their own account. The Authority found that: - The Applicant did not furnish any contractual agreement showing they incur the expenditure first and then claim it later. - The agreement with the Industry partner specified that the stipend amount is deposited by the Industry partner, not initially incurred by the Applicant. - The Applicant receives the stipend amount from the Industry partner and then disburses it to the trainees, indicating they do not incur the expenditure initially. Therefore, the Applicant does not fulfill the conditions to be considered a pure agent, and the reimbursement received towards the stipend is chargeable to GST. Issue 2: Reimbursement of Medical and Accident Insurance The Applicant also sought a ruling on whether the reimbursement received against the cost of medical and accident insurance obtained for the benefit of trainees is chargeable to GST. The Applicant claimed that they act as a pure agent in this regard as well. Applicant's Interpretation: The Applicant argued that: - They incur the cost of insurance on behalf of the Industry partner. - The insurance costs are separately indicated in the invoices. - The insurance costs are additional to the services provided on their own account. Authority's Findings: The Authority found that: - The Applicant did not provide any contractual agreement authorizing them to incur the insurance costs first and then claim them from the Industry partner. - The agreement with the Industry partner indicated that the insurance costs are deposited by the Industry partner, not initially incurred by the Applicant. - The Applicant receives the insurance amount from the Industry partner and then disburses it, indicating they do not incur the expenditure initially. Therefore, the Applicant does not fulfill the conditions to be considered a pure agent, and the reimbursement received against the cost of medical and accident insurance is chargeable to GST. Ruling: 1. The Applicant does not qualify to be a pure agent of the Industry partner to the extent of reimbursement received towards the stipend paid to trainees and therefore the said reimbursement is chargeable to GST. 2. The Applicant does not qualify to be a pure agent of the Industry partner to the extent of reimbursement received against the cost of medical and accident insurance obtained for the benefit of trainees and therefore the said reimbursement is chargeable to GST.
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