GST leviable on Reimbursement of Stipend to Trainees on behalf of Industry Partner: AAAR [Read Order]

The Karnataka Appellate Authority for Advance Ruling has held that Goods and Services Tax (GST) is leviable on reimbursement of the stipend to trainees on behalf of the industry partner.

The appellant, Teamlease Educational Foundation, an approved National Employability Enhancement Mission (NEEM) facilitator partner with various trainers and Employers/Companies/Industry (industry partners) for imparting training to NEEM trainees. The objective of the National Employability Enhancement Mission (NEEM) is to offer job practical training to enhance the employability of a person either pursuing his or her Post-Graduate / Graduate / Diploma in any technical or non-technical stream or has discontinued studies after class 10^th to enhance his / her employability.

The appellant, as well as the industry partner, have certain obligations as per the NEEM Regulations, and thus to fulfill the obligations, the applicant charges Administration Fee, Sourcing Fee, Enrollment Fee, reimbursement of the monthly stipend paid to trainees on behalf of the industry partner and reimbursement of the cost of medical and accident insurance obtained for the welfare of trainees as agreed by the Industry Partner.

The appellant, collecting GST on the entire transaction value including the reimbursement amounts, is of the view that the reimbursement received towards the stipend is an expenditure or cost incurred as a pure agent of the Industry Partner as per rule 33 of the CGST Rules 2017 and therefore such reimbursements should be excluded from the taxable value and hence GST should not be charged on such reimbursements. The Authority for Advance Ruling on the application ruled that the appellant did not fulfill the condition stipulated in Rule 33 and did not qualify to be a pure agent. The aggrieved appellant approached AAAR.

The appellate authority observed that the task of providing adequate training to the enrolled trainees and payment of stipends to the trainees is an obligation on the part of the appellant and as part of this responsibility and in their interest they have deployed trainees to the premises of the company. Since the deployment and completion of training is an activity undertaken in his interest as a NEEM Facilitator, the appellant fails to satisfy the definition of a pure agent.

The Coram of Smt. Rajana Jha, Member and Smt. Shikha C, Member, while upholding the ruling given by the lower authority has held that “mere agreement with the company to utilize the stipend amount for the payment to the trainees and the invoice showing such amount separately does not mean that the appellant is a pure agent and is absolved of his liability”.

To Read the full text of the Order CLICK HERE

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