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TMI Blog2025 (3) TMI 729X X X X Extracts X X X X X X X X Extracts X X X X ..... ents 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing held on 03.07.2024 and have further confirmed the same vide their letter dated 08.07.2024. Hence Applicant's submissions are only be in respect of Question No. 1 namely; "Whether the reimbursement by the said Industries/Companies to the applicant, of the expenses incurred by the applicant, in respect of stipend paid to students/trainees as a pure agent under GST Laws, attracts GST?". 1.2 University Grant Commission (UGC) has developed guidelines for a sustainable and vibrant university-industry linkage system for Indian universities. Guidelines will help develop skill sets among learners and make them industry ready through internships, including field/industry/on-job skills/vocational training/life skills to achieve the learning objectives and attain desired outcomes effectively. 1.3 The applicant is registered under the Companies Act, 2013 has developed a scheme of skill development courses on "learn & earn" basis for persons/students/ trainees in the age group of 18 to 30 based on dual education model of Germany. The main object of the "learn & earn" program is enhancing the skill of the nation's youth and increasing their chances of employability by gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon receipt of written intimation from the Clients about occurrence of any incidences like any unlawful behaviour; repeated breach of the Client polices, or continues irregularity in attending the training etc. i) to Provide various types of Mediclaim/accident/insurance coverage to the trainees as per Workmen Compensation Act, 1923 and the same to be reimbursed at cost by the Industry Partmers/Companies. j) To provide uniform, safety shoes and educational material to trainee students. Functions and responsibilities of industry partners: 1.7 The functions and responsibilities of industry partners/companies are as under: A. Enter into agreement with students for practical training for stipulated period and provide On-The-Job Practical Training to Learn & Earn Student Trainees. B. Allow the Learn & Earn Student Trainees to avail the existing arrangement by the Client like canteen, transportation, medical check-up etc. during the training period as per Client policy. C. To approve payroll and instruct Yashaswi to remit stipend to trainees. D. To reimburse the actual cost of Uniform, Safety Shoes, insurance to Yashaswi (if required to provided). Further functions of yash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute the entire amount, of such stipend received, to the trainees. As per the applicant, the trainee students are paid remuneration in the form of stipend for their Work performed as trainees with the Industry Partners who is to be considered as the employer in respect of such trainees. The Industry partner (client) being an employer, is legally bound to pay stipend to its trainees as per the provisions of The Apprentice Act 1961. From the transaction it is clearly seen that, the applicant is only acting as conduit between Industry Partner and the trainees for payment of stipend which is disbursed to the trainee as received from the Industry Partner. The applicant gets separate charges by way of administrative charges for providing the services of selecting trainees, preparing attendance record and stipend statement and disbursing stipend, taking out insurance policies, procuring uniform and safety shoes. The applicant also receives fees for theoretical courses i.e. educational services. The applicant is paying GST on administrative charges and all other amounts received by it from the Industry Partners except on Stipend received. The applicant submits that in respect of the Stip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile doing away with the erstwhile taxable events of manufacture, sale, service etc. 2.2 Section 7 (1) of the CGST Act, 2017 as was in force before amendment caused to it by the CGST (Amendment) Act, 2018, states that the expression 'supply' includes: - (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. 2.3 The Section 7 (1) of the CGST Act, 2017 was amended retrospectively w.e.f. 01.07.2017 by the CGST (Amendment) Act, 2018. As per this amendment, the expression 'supply' includes:- (a) all forms of supply of goods or services or both such as sale, transfer, barter, www.nexchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pure agent under GST Laws, attracts GST? 2. Whether the reimbursement by the said Industries/Companies to the applicant, of the expenses incurred by the applicant in respect of insurance premium/ Mediclaim premium of the students/trainees, as a pure agent under GST Laws, attracts GST? 3. Whether the reimbursement by the said Industries/Companies to the applicant, of the expenses incurred by the applicant in respect of uniform and safety shoes of the students/trainees, as a pure agent under GST Laws, attracts GST? Whereas, Question No 2 and Question No 03 has been withdrawn as per letter dated 08 July 2024 to The Registrar, Advance ruling authority Mumbai. The advance ruling authority, Maharashtra has held online preliminary hearing on 03/07/2024 and 10/07/2024 and application is admitted. A Courtesy letter was then issued to the taxpayer on 11/07/2024 for verification advance ruling related books and documents. In reply, the applicant has submitted the following documents - a) GR dated 09.05.2023 of Government of Maharashtra b) Document related to allotment of code to Industrial training partner, by Maharashtra state board for Technical Education (MSBTE) c) List of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.05.2024) raised by the applicant to the industry partner M/s Mahindra and Mahindra Ltd, we can see that applicant has charged education fees Rs.1000 per unit in case of 103 students. Also, that he has issued an insurance of students working for Industry partner Rs.290 per unit. Applicant has charged administrative charges Rs. 550/- per unit. If we go through the invoice (No. YSL/24-25/70102 dated 07.05.2024) raised by the applicant to the industry partner M/s Mahindra and Mahindra Ltd, we can see that applicant has charged for other services i.e. T shirt reimbursement Rs. 390 per unit. Also, that he has issued an Mediclaim insurance of students working for Industry partner Rs.130 per unit. Applicant has charged workman compensation policy charges Rs. 160/- per unit. If we go through the invoice no. YSL2425/70102, Applicant is receiving reimbursement stipend from the industry partner at Rs. 1086976/- for the month of April 2024. Applicant has claimed in his application that the reimbursement of Stipend is in the ole of Pure agent and has claimed the said reimbursement as exempted supply under rule 33. Legal provisions- In this regard, your kind attention is brought towards th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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, insurance cost, supervision charges, education fee 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. b) The applicant has furnished a copy of agreement entered with the Industry partner ie. Mahindra and Mahindra, LM Wind Power Blades (India) Pvt Ltd and GKN Sinter Metals Pvt Ltd, wherein clause clearly specifies that "the Industry partner shall deposit the amount towards stipend to the trainees and also towards the medical and accident insurance of the trainees, academic/ administrative charges as per annexure A on or before 7th every month" or release invoice payment within agreed time frame, which it is clearly evident that the applicant is not incurring the said amount initially and latter claiming the said amount by raising an invoice. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am lease Education Foundation has decided the same question and has held that the applicant does not qualify to be a pure agent of the industry partner to the extent of reimbursement received towards stipend paid to the trainees on behalf of industry partner as part of training agreement and therefore the said reimbursement is chargeable to GST. In view of the above discussion I, being the Jurisdictional officer (PUN-NOD-C-0510/PUN-VAT-C-120) submits that the applicant M/s Yashaswi Skills Ltd does not qualify to be a pure agent of the industry partner to the extent of reimbursement received towards stipend paid to the trainees on behalf of industry partner as part of training agreement. Further, the applicant has not submitted any supporting notification to prove that the stipend expenses are exempt supply under GST law and therefore the said reimbursement is chargeable to GST. 4. HEARING Preliminary e-hearing in the matter held on 03.07.2024. Mr. Ananthakrishnan R. Iyer, Senior Consultant Appeared, and requested for admission of the application. Jurisdictional Officer Mr. Tambe B.S., PUNE-VAT-C-120, also appeared. The application was admitted and called for final hearing on 26. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sation of the selected Trainees for On-the-Job Practical Training at the premises of the industries; complying with all terms and conditions of the agreements entered into, with the Client Companies; maintaining all records of attendance of trainees, their progress and such other records, etc.; Providing various types of Mediclaim /accident/insurance coverage to the trainees as per Workmen Compensation Act, 1923 to be reimbursed at cost by the Industry Partners/Companies; providing uniform, safety shoes and educational material to trainee students, etc.. The applicant also has to ensure and make timely payments of Stipend (in actuals, received from the companies) to the Trainees, as per the agreements with the industry partners. 5.6 The Applicant is required to make payment of stipend to the trainees after it is received from the Industry Partners. The said transaction is explained as below. (a) Applicant prepares monthly payroll on receipt of attendance from client and raises invoice for stipend payable to students and submits it to the respective Industry partners. (b) Industry partner passes it by deducting any amount for absentee or otherwise as per terms of agreement with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from which it is clearly evident that applicant is not incurring the said amount initially and later claiming the said amount by raising an invoice. Thus, even on this account also the applicant is not fulfilling the required condition. The jurisdictional officer has further submitted that Hon. Authority for Advance Ruling in Karnataka vide its advance Ruling No. KAR ADRG 07/20222 dated 08.03.2022 in case of M/s Team lease Education Foundation has decided the same question and has held that the applicant does not qualify to be a pure agent of the industry partner to the extent of reimbursement received towards stipend paid to the trainees on behalf of industry partner as part of training agreement and therefore the said reimbursement is chargeable to GST.' Hence, in view of the above submissions made by him, he is of the opinion that, the reimbursement by the industry partner to the applicant of the stipend paid to students is taxable in the hands of the applicant. 5.9 In response to the observations of the jurisdictional officer, the applicant has responded as under: (a) Agreements were entered into between applicant and the industries/training partners to the extent of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise. In fact, the payment of stipend to the trainees is made by the Applicant and gets the same reimbursed in full from the Industry Partners is as a result of the agreements between the Applicant and the Universities/Industry Partners. (e) The applicant has submitted that as per Schedule III, "Services by an employee to the employer in the course of or in relation to his employment" shall be treated neither as a supply of goods nor a supply of services. As per FAQ released by the CBIC in GST Troubleshooting - 250 solutions to Taxpayers Problems. Relevant extract of the same is reproduced as under: "Q.78 Under supply from unregistered dealer the purchaser has to pay GST on RCM basis. So, whether stipend paid to intern will also come under RCM? Answer: Stipend paid to interns will be employer-employee transactions. Hence, not liable for GST." (f) The applicant has submitted that the stipend amount paid to interns is not chargeable to GST as it is considered as employee-employer transaction. Such transactions are kept out of the purview of the GST by virtue of Schedule III of the CGST Act. In the instant case, stipend is paid to the trainees/interns which is nothing but a rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 5.12 From the details of transaction submitted, it is seen that 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. Two sample agreements with the Industry partners submitted by the Applicant are analysed. The agreements between M/s LM Wind Power B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. In the invoice issued by YSL to the industry partners, stipend amount is separately indicated. Trainees/ students engaged with Industrial partners are enrolled with universities and they are on the job trainees registered with Industrial Partners. During on-the-job training, students add value addition to Industrial Partners. This means that the trainees provided by YSL are on production floor with skilled manpower of Industrial Training partners. 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 condit ..... 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