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2025 (3) TMI 470 - AAR - GSTLevy of GST - stipend received from the industry partner by Logskim and paid to trainees without making any deduction - sale of Uniforms and shoes and the amount of Insurance Premium sold to the industry partner at cost without any margin/markup - pure agent services or not - HELD THAT - Under the Explanation to Rule 33 the expression Pure Agent has been defined as a person who (i) enters into a contractual agreement with the recipient of supply (ii) neither intends to hold nor holds any title to the goods or services or both so procured or supplied (iii) does not use the same for his own interest and (iv) receives only the actual amount incurred to procure such goods or services. Further for the purpose of exclusion from the taxable value certain conditions are required to be fulfilled viz. payment should be made to the third party by the supplier on authorisation from the recipient of supply; the payment made has been separately indicated in the invoice issued to the recipient of supply; the supplies procured are in addition to the supplies on his own account. No supplies are procured by the supplier (applicant) in the instant case as the supplier just acts as a conduit in receiving the stipend amount from the industry partner and disbursing the same to the trainees. Further no payment is made to any third party as no supply is procured by the applicant and only disbursal of funds (stipend) takes place. Accordingly we find that the conditions as in clauses (i) and (iii) to Rule 33 of the CGST Act 2017 do not get fulfilled in the instant case. Apart from the above the amount or value that is eligible for exclusion from the taxable value under the pure agent concept prima facie has to be an expenditure or cost which was incurred by the supplier as a pure agent of the recipient of supply. This is not so in the instant case of the applicant because they have neither incurred any expenditure / cost on their own account nor they have made payment to any third party in this regard. Sale of Uniforms and shoes and the amount of Insurance Premium to industry partner - HELD THAT - The reimbursement in actuals happen only in the case of disbursal of stipend to trainees. Accordingly once it is held that the appellant does not act as a Pure Agent even in the case of stipends the question of applying Pure Agent test to the case of sale of Uniforms and shoes and the amount of Insurance Premium to industry partner does not arise at all as the expenses in this case are admittedly not reimbursed in actuals. It becomes imperative to reiterate here that reimbursement in actuals i.e. without any margin or mark-up is not the only criteria to determine the concept of Pure Agent and that it involves fulfillment of many other conditions as well as laid down under rule 33 of the CGST Rules 2017. Under the facts and circumstances of the case the appellant does not act as a Pure Agent as far as it relates to the supply involving the sale of Uniforms and shoes and the amount of Insurance Premium to industry partner and accordingly the same becomes taxable under the CGST Act 2017. Conclusion - i) The amount of stipend received from the industry partner by Logskim and paid to trainees without making any deduction is chargeable to tax under the CGST/TNGST Acts 2017. ii) The sale of Uniforms and shoes and the amount of Insurance Premium sold to the industry partner is chargeable to tax under the CGST/TNGST Acts 2017.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment were: 1. Whether the stipend received from the industry partner by the applicant and paid to trainees without any deduction is chargeable to tax under the CGST Act. 2. Whether the sale of uniforms and shoes and the amount of insurance premium sold to the industry partner at cost without any margin/markup is chargeable to tax under the CGST Act. 3. Whether the interpretation of law as made by the applicant in their submissions is correct. ISSUE-WISE DETAILED ANALYSIS 1. Taxability of Stipend Payments - Relevant legal framework and precedents: The applicant argued that the stipend should not be included in the taxable value under GST as they act as a 'pure agent' per Rule 33 of the CGST Rules, 2017. The rule allows exclusion from taxable value if the supplier acts as a pure agent, fulfilling specific conditions. - Court's interpretation and reasoning: The Court examined Rule 33, which defines a pure agent and outlines conditions for exclusion from taxable value. The applicant failed to meet these conditions, notably the requirement for making payments to a third party and not holding title to the goods or services. - Key evidence and findings: The Court noted that the applicant merely disbursed funds (stipend) received from the industry partner to trainees without incurring any expenditure on their own or making payments to a third party. - Application of law to facts: The stipend disbursed did not qualify as an 'expenditure or cost' incurred by the supplier, as required by Rule 33, and thus could not be excluded from the taxable value. - Treatment of competing arguments: The applicant cited other Advance Rulings supporting their position. However, the Court emphasized that Advance Rulings apply only to the specific applicant and circumstances. - Conclusions: The stipend paid to trainees is chargeable to tax under the CGST Act as the applicant does not qualify as a 'pure agent.' 2. Taxability of Sale of Uniforms, Shoes, and Insurance Premium - Relevant legal framework and precedents: The issue concerned whether these sales at cost without markup are taxable under the CGST Act. - Court's interpretation and reasoning: The Court noted that the applicant admitted to markup in all expenditures except for the stipend. Therefore, the question of applying the 'pure agent' concept did not arise for these transactions. - Key evidence and findings: The applicant's own admission during the hearing that only stipend payments were reimbursed without markup was critical. - Application of law to facts: The sale of uniforms, shoes, and insurance premiums involves markup and does not meet the conditions for exclusion under the 'pure agent' concept. - Treatment of competing arguments: The applicant did not provide a compelling argument for exclusion under the 'pure agent' concept, given the markup involved. - Conclusions: These sales are chargeable to tax under the CGST Act. 3. Interpretation of Law - Relevant legal framework and precedents: The applicant sought a ruling on their interpretation of the law. - Court's interpretation and reasoning: The Court determined that this query does not fall under the categories specified in Section 97(2) of the CGST Act for which an advance ruling can be sought. - Conclusions: The Court refrained from answering this query. SIGNIFICANT HOLDINGS - Core principles established: The judgment reinforced the specific conditions under Rule 33 of the CGST Rules, 2017, for a supplier to qualify as a 'pure agent' and exclude certain amounts from taxable value. - Final determinations on each issue: (i) The stipend paid to trainees is chargeable to tax under the CGST/TNGST Acts, 2017. (ii) The sale of uniforms, shoes, and insurance premiums is chargeable to tax under the CGST/TNGST Acts, 2017. (iii) The Court refrained from answering the query regarding the interpretation of law due to its nature not fitting within the advance ruling scope as per Section 97(2) of the CGST Act.
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