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2023 (6) TMI 828 - AAAR - GSTValuation of supply - pure agent services or not - entitlement to claim deduction of the reimbursement of amount of stipends and other expenses received from the NEEM Trainer from the value of supply - Rule 33 of the CGST Rules, 2017 - HELD THAT - To qualify mere receiving payment under the cover of reimbursement of Stipend amount and other expenses incurred by the Appellant in accordance with AICTE (NEEM) Regulations to ensure wealth, safety and health of NEEM Trainees from NEEM Trainer as a payment received by a pure agent, all parameters prescribed in conditions and meaning stated u/r 33 of the CGST Rules are required to be fulfilled. In this case, despite giving enough opportunity, the appellant is neither able to establish that appellant was fulfilling conditions of pure agent . Appellant was not found to be duly authorized at the time of making payment of stipend on the behalf of the NEEM trainer/the recipient. There is only one supply of deployment of NEEM Trainees, whereas, administration of Trainees is ancillary work of deployment of NEEM Trainee, entire working is as per NEEM Regulation. The terms of the agreement make it clear that the expenditure of payment of stipend to the NEEM Trainees was on his own and not on the behalf of the NEEM Trainer. The appellant, as per NEEM Regulations, has the sole responsibility to engage NEEM Trainees and supply them to Trainer under separate agreements - As per terms of para 3 and para 5.1 (xiii) of the agreement with LG, stipend will be paid by company / NEEM Trainer to the appellant and by the appellant to the NEEM Trainees, respectively. Whereas, as per para 8(a) of the agreement with Interplex, payment of stipend will be made by company / NEEM Trainer to the appellant and as per para 8(b), stipend will be paid by the appellant to the NEEM Trainees. It is the Appellant who is obligated to pay the stipend to the trainees. Since the trainee has registered with the Appellant/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. The activity of deploying trainees to the Company to undergo training is undertaken by the Appellant in his own interest as a NEEM Facilitator. While the NEEM Regulations make provisions for the NEEM Facilitator to partner with Companies/Industries to provide the training, it makes the Facilitator responsible for payment of stipend and for issue of the training completion certificate. The Regulations do not cast any responsibility on the Company or the Industry who is providing the practical training - 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 the definition of pure agent as given in the explanation to Rule 33. The appellant do not fulfil the conditions and clauses of meaning of pure agent prescribed under rule 33 of the CGST Rules, 2017. Hence, the appellant is not allowable to claim deduction of the reimbursement of amount of stipends and other expenses received from the NEEM Trainer from the value of supply.
Issues involved:
1. Validity of the contract between the Appellant and LG. 2. Contradictions in the agreement with Interplex. 3. Applicability of GST on reimbursement amounts received by the Appellant. 4. Whether the Appellant acts as a "pure agent" under Rule 33 of the CGST Rules, 2017. Summary: 1. Validity of the contract between the Appellant and LG: The Appellant argued that the validity of the contract with LG was not in dispute and that the contract was genuine as services were provided, and payments were received. The Appellant contended that the AAR erred by focusing on the contract's expiration date and not considering the ongoing nature of the business. 2. Contradictions in the agreement with Interplex: The Appellant argued that the agreement with Interplex was consistent with AICTE (NEEM) Regulations. The AAR's finding of contradictions was contested, and the Appellant emphasized that the stipend amount was pegged to the minimum wages fixed by the Government, ensuring no exploitation of NEEM Trainees. 3. Applicability of GST on reimbursement amounts received by the Appellant: The Appellant claimed that the reimbursement amount received from NEEM Trainer towards "Stipend and other expenses incurred by the Appellant in accordance with AICTE (NEEM) Regulations" should not attract GST. The Appellant argued that they acted as a conduit for payment and did not provide the service directly to NEEM Trainer. 4. Whether the Appellant acts as a "pure agent" under Rule 33 of the CGST Rules, 2017: The Appellant argued that they fulfilled all criteria to be considered a "pure agent" and hence, the reimbursement amounts should not be included in the value of taxable supply. However, the appellate authority found that the Appellant did not meet the conditions of Rule 33, such as authorization by the NEEM Trainer, separate invoicing for pure agent expenses, and the nature of supply being additional to the services provided on their own account. Discussion and Findings: The appellate authority examined the agreements and found that the Appellant did not satisfy the conditions to qualify as a "pure agent." The agreements did not show that the NEEM Trainer authorized the Appellant to make stipend payments on their behalf. The Appellant was found to be directly responsible for paying the stipend to NEEM Trainees, and the reimbursement was considered part of the consideration for the supply of deployment services. Order: The appellate authority upheld the AAR's decision with some modifications, ruling that the reimbursement amount received by the Appellant from NEEM Trainer towards "Stipend and other expenses incurred by the Applicant in accordance with AICTE (NEEM) Regulations" is not in the capacity of a pure agent. The appeal filed by M/s Beeup Skills Foundation was rejected.
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