2025 (3) TMI 729 - AAR - GST

Levy of GST - reimbursement of the expenses incurred by the applicant in respect of stipend paid to students/trainees as a pure agent under GST Laws - HELD THAT - The main object of the Applicant is to enhance the skill of students and enhancing their chances of getting employment by providing practical training to them and an opportunity to also earn for their education. In pursuance of this objections it has entered into agreements with the Savitribai Phule Pune University Pune and Lamrin Tech Skill University Punjab Maharashtra State Board for Technical Education for conducting their on the job training courses in various industries and for providing the students an opportunity of working as trainees/interns in the various industries. The applicant has also entered into agreements with the Industry Partners to coordinate and liaison with them for providing on-the-job practical training and theoretical training for training of youth/students of the above-mentioned Universities/MSBTE. The Applicant is getting reimbursed exactly the same amount from the industry partners which is paid/payable to the trainees as stipend. Hence it is imperative to analyse if the Applicant acts as pure agent as far as this transaction is concerned - While learning students help or contribute to completing jobs and responsibilities of skilled manpower of Industrial Training Partners. Since these trainees enrolled with Universities are on the roll of Industrial Partner and are providing service to Industrial Partner In the entire process they are eligible for stipends from the industry partners. YSL is only supporting them to get students enrolled with University deploy them with Industrial training partners and doing compliances which are charged separately in the invoices raised to the industrial partners. Hence the Applicant satisfies all the conditions of pure agent under Rule 33. Thus it is seen that M/s YSL acts as pure agent of the Industry partners for payment of stipend to the trainees. The applicant is only acting as agent in collecting the stipend from the industry partners 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. In view of the above discussions we hold that applicant is acting as pure agent . Conclusion - The amount of stipend received by the applicant from the industry partners and paid in full to the trainees does not attract GST.

Summary

ISSUES PRESENTED and CONSIDERED

The core issue considered was whether the reimbursement by industry partners to the applicant, Yashaswi Skills Limited (YSL), for expenses incurred in respect of stipend paid to students/trainees as a pure agent under GST laws attracts GST.

ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The case revolves around the interpretation of Rule 33 of the Central Goods and Services Tax (CGST) Rules, 2017, which defines the conditions under which a supplier acts as a "pure agent" and excludes certain expenditures from the value of supply. The applicant argued that they acted as a pure agent for the industry partners in disbursing stipends to trainees, thereby exempting these transactions from GST. The jurisdictional officer contested this, citing a lack of evidence supporting the pure agent status and referencing a similar case, M/s Team Lease Education Foundation, where the reimbursement was deemed taxable.

Court's interpretation and reasoning:

The Tribunal examined the agreements between YSL and its industry partners, which stipulated that the industry partners would reimburse YSL for stipends paid to trainees. The Tribunal noted that YSL did not retain any portion of the stipend and acted merely as a conduit for its disbursement. The Tribunal also considered the broader educational and skill development context, which aligns with national policies encouraging industry-academic linkages.

Key evidence and findings:

The Tribunal reviewed agreements between YSL and industry partners, invoices indicating separate stipend reimbursement, and the nature of the transactions. It was found that YSL's role was limited to facilitating the stipend payments without holding any title or interest in the funds, fulfilling the criteria of a pure agent under Rule 33.

Application of law to facts:

The Tribunal applied Rule 33 to determine that YSL's actions conformed to the definition of a pure agent. The conditions were met: YSL had a contractual agreement with industry partners, did not hold title to the stipend funds, and the stipend payments were separately indicated in invoices.

Treatment of competing arguments:

The jurisdictional officer's argument that YSL did not qualify as a pure agent was countered by the Tribunal's finding that the agreements and transaction structure supported YSL's claim. The Tribunal distinguished this case from the M/s Team Lease Education Foundation case by noting the absence of NEEM regulations and the direct agreement between YSL and industry partners.

Conclusions:

The Tribunal concluded that YSL acted as a pure agent in the reimbursement of stipends and that such reimbursements did not attract GST.

SIGNIFICANT HOLDINGS

The Tribunal held that the reimbursement by industry partners to YSL for stipends paid to trainees does not attract GST under the GST laws. This decision was based on the determination that YSL acted as a pure agent, meeting all conditions outlined in Rule 33 of the CGST Rules, 2017.

Core principles established:

The judgment reinforces the principle that reimbursements handled by an entity acting as a pure agent, without retaining any interest or title in the funds, and fulfilling the conditions of Rule 33, are not subject to GST. It also highlights the importance of clear contractual agreements and proper invoicing in establishing pure agent status.

Final determinations on each issue:

The Tribunal determined that the reimbursement of stipends by industry partners to YSL does not attract GST, as YSL qualifies as a pure agent under the relevant GST provisions. Questions regarding reimbursements for insurance premiums and uniform/safety shoe expenses were not addressed, as they were withdrawn by the applicant.