reimbursement isn't chargeable GST
Case Title | Teamlease Education Foundation |
Court | Karnataka AAAR |
Honorable Judges | Member Ranjana Jha & Member Shikha C |
Citation | 2022 (6) GSTPanacea 383 HC Karnataka KAAR/AAAR/04/2022 |
Judgement Date | 06-June-2022 |
Council for Petitioner | Harish Bindumadhavan Disha Gursahaney |
Council for Respondent | NA |
Section | Section 101 of the CGST Act |
In Favour of |
The Karnataka Bench of Member Ranjana Jha & Member Shikha C has held that Since the deployment of trainees to the Company and ensuring that the trainees complete the training is an activity undertaken by the Appellant in his own interest as a NEEM Facilitator, the Appellant fails to satisfy the definition of `pure agent` as given in Rule 33 of the CGST Rules.
Hence bench uphold the order passed by the Advance Ruling Authority and the appeal filed by the Appellant stands dismissed on all accounts.
FACTS OF THE CASE
The Appellant is an approved NEEM Regulations, 2017. As per NEEM Regulations, a person registered for receiving training is called a Trainee. A contract is required to be executed between NEEM Facilitator and NEEM Trainee; the contract is neither an offer employment nor a guarantee of employment.
The Trainees are entitled for payment of remuneration/stipend under the NEEM Regulations which shall be at par with the prescribed minimum wages for unskilled category. Such remuneration/stipend shall be paid as a single consolidated amount without any statutory deductions applicable to regular employees viz. PF/ESI, etc since the NEEM contract assures training and does not constitute employment.
The Appellant on the other hand is responsible for executing an agreement with each trainee, prior to deploying the trainee to the industry partner, payment of stipend to the trainee engaged by the industry partner and payment of premium towards medical and accident insurance obtained for the trainees. For this, the Appellant charges the industry partner an `Administrative fee` and reimbursement of the monthly stipend and reimbursement of cost of medical and accident insurance.
The Appellant approached the Authority for Advance Ruling (AAR) seeking a ruling on the following questions:-
- “Whether the 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 and therefore the said reimbursement is not chargeable to GST?
- Whether the Applicant is acting as a pure agent of the industry partner to the extent of 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 and therefore the said reimbursement is not chargeable to GST?”
The AAR vide its order KAR ADRG No 07/2022 dated 8th March 2022 held as under:-
“The Applicant does not qualify to be 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 and therefore the said reimbursement is chargeable t GST
The Applicant does not qualify to be a pure agent of the Industry partner to the extent of 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 and therefore the said reimbursement is chargeable to GST.”
Aggrieved by the ruling given by the AAR on the issue of reimbursement of stipend paid to the trainees on behalf of the industry partner, the Appellant has filed this appeal on the following ground
The Appellant submitted that the first condition under Rule 33 that, the supplier acts as a pure agent of the recipient of the supply when he makes the payment to the third party on authorisation by such recipient has been complied with
The Appellant submitted that they have fulfilled that second condition of Rule 33 which is, the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; that the same is not disputed in the impugned order
With regard to the third condition under Rule 33 which reads as, the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services, he supplies on his own account, the Appellant submitted that clause 3 of the Agreement clearly distinguishes between the supplies made by the Appellant on his own account, for which an administrative fee and a sourcing fee is payable to the Appellant and the supplies made by the trainees to the Appellant as per their dedicated employment with the industry partners; that the impugned order has inadvertently recorded that the Appellant has not furnished any information with regard to procurement of supplies from the third party; that the impugned order has made no findings on this submission by the Appellant and is therefore, non-speaking to this extent.
The Appellant submitted that they are acting as pure agent of the industry partner to the extent of reimbursement received towards stipend paid to the trainees on behalf of the industry partner as part of the training agreement and therefore the said reimbursement is not chargeable to GST
reimbursement isn't chargeable GST
COURT HELD
Considering the facts as recorded, held that bench find that Appellant fails to satisfy the 3rd condition of
i.e `the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account.”
Since the deployment of trainees to the Company and ensuring that the trainees complete the training is an activity undertaken by the Appellant in his own interest as a NEEM Facilitator, the Appellant fails to satisfy the definition of `pure agent` as given in Rule 33 of the CGST Rules.
Bench uphold the order passed by the Advance Ruling Authority and the appeal filed by the Appellant stands dismissed on all accounts.
reimbursement isn't chargeable GST
ANALYSIS OF THE JUDGEMENT
The task of providing adequate training to the enrolled trainees and payment of stipend to the trainees is an obligation on the part of the Appellant and as part of this responsibility and in their own interest they have deployed trainees to the premises of the Company.
Since the deployment of trainees to the Company and ensuring that the trainees complete the training is an activity undertaken by the Appellant in his own interest as a NEEM Facilitator, the Appellant fails to satisfy the definition of `pure agent` as given in Rule 33 of the CGST Rules.
Merely because the agreement with the Company states that the stipend amount will be utilized for payment to the trainees and the invoice shows the stipend amount separately, it does not mean that the Appellant is a pure agent and is absolved of his liability.
Therefore, while agreeing with the ruling given by the lower Authority that the Appellant does not qualify to be a pure agent of the industry partner to the extent of reimbursement received towards stipend paid to the trainees, we disagree with the reasoning given by the lower Authority to reach this conclusion.
Bench accordingly set aside the reasoning and hold that for the reasons set forth in our discussions in the aforesaid paras, the Appellant fails to qualify as a pure agent with regard to the payment of stipend to the trainees which is reimbursed by the Company.
Download PDF:
Teamlease Education Foundation
For Reference Visit:
Karnataka High Court