The present application has been filed under Section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act” respectively] by M/s. 2COMS FOUNDATION, the applicant, seeking an advance ruling in respect of the following questions.

Whether the reimbursement received by 2COMS foundation (applicant by industry partner, for the stipend paid to students, attract GST?

At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression ‘GST Act’ would mean CGST Act and MGST Act.

2. FACTS AND CONTENTION – AS PER THE APPLICANT FACTS:

2.1 2COMS Foundation, (the applicant/NEEM Facilitator) is registered as Trust under the Indian Trust Act, 1882 & also registered under sec. 12AA of Income-tax Act, 1961 as not for profit organization with GSTIN: 27AAATZ.2088B1ZG. Applicant Trust is also registered as Agent under National Employability Enhancement Mission (hereinafter for the sake of brevity referred as ‘NEEM’) as a NEEM Facilitator under NEEM ID : 1-4241562511.

2.2 NEEM is a Central Government initiative for enhancing the employability of the graduate/diploma holder in any technical/non-technical stream. To organize the activity methodically, the Central Government has formulated NEEM Regulations. Organizations having expertise in this field are required to get itself registered as NEEM agent (facilitator) with All India Council for Technical Education (AICTE). NEEM Agent’s job is to select trainees and also suitable industry partners.

2.3 The Applicant N EEM agent as a facilitator would extend support for mobilizing the trainees under NEEM Scheme of Government of India as per NEEM regulations issued under notification issued by All India Council for Technical Education (AICTE) for providing to trainees, on-the-job practical training in industries to enhance their future employability. For that purpose, NEEM agent enters into agreements with various companies/organizations (hereinafter called as industry Partner) who impart actual practical training to the students.

2.4 During the duration of the training, the trainees deployed by the applicant to undergo on-the job practical training with the Industry Partner for which the trainees would also be paid monthly stipend.

2.5 Applicant to enter into contract with Industry partner for giving Industrial training to students. As per rules of NEEM scheme, the Applicant to choose suitable industry partner (having infrastructure facilities) for onsite job training to selected trainees within the premise of the Industry Partner. As per agreement, industry partner to be under obligation to pay stipend to trainees & applicant to act as agent on behalf of industry partner in processing Stipend of Trainees and disbursing the same to the trainees on behalf of Industry Partner. Monthly stipend, to be paid to respective Trainees, will be paid by the Industry Partner to the Applicant & thereafter Applicant to pay the stipend amount on actual basis to the respective Trainees. Minimum stipend payable by industry to trainee is fixed by the Government considering nature of work and educational qualification of trainee.

2.6 The Role of the applicant is :

(a) Preparation of monthly attendance record of the trainees and getting it certified from the Company;

(b) Processing Stipend of the trainees

(c) Payment of stipend to the trainees in their individual bank accounts after getting it reimbursed from the Industry Partner.

For carrying out these functions, Applicant shall get fixed administrative fees per candidate from the Industry partner. The applicant issues invoices specifying separately:

(A): The administrative charges and;

(B): The amount for reimbursements of Actual expenses incurred on behalf of industry partner towards:

(i) Stipend paid to the trainees. Thus, the Invoice primarily to comprise the details of Administrative Charges (leviable to GST) and Reimbursement Amount.

2.7 Applicant seeks Advance Ruling on applicability of GST on Re-imbursed amount i.e. Stipend received from Industry Partner to be distributed to the trainees at actuals.

B. STATEMENT CONTAINING APPLICANT’S INTERPRETATION OF LAW

2.8 Section 9 of the CGST Act, 2017 envisages levy of GST on the value determined under Section 15 of the CGST Act & Section 15 of the said Act envisages that such value shall be determined in such manner as may be prescribed.

2.9 The applicant is of the opinion that it acts as Pure Agent as far as payment of Stipend and collection by mode of reimbursement of Stipend is concerned and as a Pure Agent in the subject transaction satisfies all the conditions mentioned in Rule 33 of Chapter IV of CGST Rules, 2017, tabulated as under:-

2.10 Since applicant is a Pure Agent for Stipend reimbursement, they are also of the opinion that they satisfy conditions of Rule 33 for exclusion of the expenditure / costs being reimbursed from the value of Supply. Pointwise tabular remarks of the applicant are as under:

2.11 The Opinion of the Applicant is squarely substantiated with the Advance Ruling in case of Yashaswi Academy for Skills issued vide Order No. GST-ARA-84/2019-20/B-48 dated 20.08.2021. The extract of the decision of AAR with very similar facts and similar questions are being reproduced as under:

“In view of the extensive deliberations as held hereinabove, we pass an order as follows:

ORDER (Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) For reasons as discussed in the body of the order, the questions are answered thus –

Question 1. Whether the reimbursement by Industry Partner to YAS of the stipend paid to students attracts GST?

Answer:- The reimbursement by Industry Partner to the applicant (YAS), of the stipend paid to the trainees, does not attract tax under the GST Acts.

…………………………….”

It is noteworthy that Yashaswi Academy for Skills is also NEEM registered Facilitator and in a very similar kind of profession as the Applicant is.

2.12 Attention is also invited to another Advance Ruling in case of Cadmaxx Solutions Education Trust passed by the Karnataka Advance Ruling Authority vide Order No.- KAR ADRG 85/2019 dated September 25th 2019. The extract of the Ruling is being reproduced hereunder:

Quote

“7. In view of the foregoing, we rule as follows

RULING

1. The reimbursement of the stipend paid to the trainees does not attract tax under the GST Acts…………………………………………” unquote

Applicant states that the service affairs of Cadmaxx Solutions Education Trust is also very similar to the affairs of the Applicant.

2.13 In view of the Applicant’s Interpretation of Law read with Rule 33 of CGST Rules, 2017, Maharashtra AAR’s decision in case of Yashaswi Academy for Skills and Karnataka AAR’s decision in the case of Cadmaxx Solutions Education Trust, the applicant is of the following opinion:

03. CONTENTION – AS PER THE CONCERNED OFFICER:

Officer Submission dated 15.06.2022:-

3.1 The applicant, M/s 2COMS Foundation is enrolled as a facilitator under National Employability Enhancement Mission (NEEM), a scheme was notified by Government of India through the All India Council of Technical Education (AICTE) in July 2017 whose primary objective is to generate skilled labour by making provisions to facilitate “on job practical training” to trainees to enhance employability of a person. As a NEEM Facilitator, the applicant is responsible to enroll NEEM trainees (“the trainees”) and provide them with on job practical training through industrial partners to enhance the prospects of their employability.

3.2 An agent as defined under section 2 (5) of the CGST Act, 2017 is different from the concept of a pure agent in the sense that latter is the one who while making a supply to the recipient, also receives and incurs expenditure on some other supply on behalf of the recipient and claims reimbursement (as actual, without adding it to the value of his own supply) for such supplies from the recipient of the main supply & indicates the same in the invoice separately. The criteria for Pure Agent has been stipulated in Rule 33 of CGST Rules 2017.

3.3 The first condition of the Rule 33 states that the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorization by such recipient. In this connection it is observed that, the industrial partner verifies/certifies attendance prepared by the applicant & acknowledges the copy of invoices submitted by the Foundation. Thus there is authorization by the recipient. Any Stipend paid to student/Trainee is made by the Applicant on the Instruction of Industry Partner. Student/Trainee works within the premise of the Industry Partner as an On Site training Programme of NEEM Scheme. The ultimate beneficiary of work done by Trainee is Industry partner and not the applicant. The Applicant simple acts as Pure Agent of Industry Partner by paying the stipend and receiving the stipend by mode of reimbursement by an exact amount without keeping any load or gap or profit on the same. In present case, there is contractual obligation on the applicant to pay the stipend as is received from the trainer institute. Hence this first condition is satisfied.

3.4 The second condition of Rule 33 states that, payments made by the pure agent on behalf of the recipient of supply are separately indicated in the invoice issued by the pure agent to the recipient of service. In the instant case, invoices submitted by the applicant reveals that the supplier (viz. the Applicant) shows the reimbursement of stipend and administrative charges separately in its invoices to the Industry Partner. Thus, the second condition is also fulfilled.

3.5 The third condition of Rule 33 states that, 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. In the instant case, the Applicant is enrolled as “Facilitator” under National Employability Enhancement Mission (NEEM) under which it provides Trainees to various industrial partners, certifies the attendance of the Trainees, supervises the training and raises the invoice for which administrative charges are collected in addition to reimbursement of stipend payable to Trainees as per the terms & conditions of the agreement. The industrial partners (Recipient) accepts the Trainees recommended by the Applicant, imparts them “On Job Practical Training” in compliance with NEEM Regulations, 2017 which are notified by Government of India through All India Council of Technical Education (AICTE). Thus, other than administrative charges levied for services provided, the applicant also collects stipend to be paid to trainees. In terms of NEEM Regulations, the Trainer institutes are required to pay monthly stipend to the trainees for the duration of their training. The method of paying stipend is fixed in a manner where the industrial partners pay the stipend amount to the Applicant who in turn without deducting any amount disburses it to the trainees. Here the services provided by the Third Party (i.e. Trainee) to the recipient (i.e. industrial partners) is in the nature of work but there is no Employee-Employer Relationship between them. This is in addition to the services supplied by the Applicant on its own account i.e. identification, supply and management of trainees. Thus, the third condition is satisfied.

3.6 Above discussion leads to conclusion that the applicant has fulfilled all the three mandatory conditions which are required to be fulfilled by the Pure Agent, being a supplier, to exclude incidental expenses or costs incurred while making a supply to the recipient.

3.7.1 But whether the applicant is a Pure Agent of the recipient? This can be analyzed by invoking Explanation to Rule 33 which has defined “pure agent” means a person who –

(a) Enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both.

As per the submissions made by the applicant, various industrial partners and the applicant enter into contractual agreements, the terms & conditions of all such agreements are similar. From the terms & conditions of agreements, it is observed that the role of the applicant is as a “facilitator” who, besides providing trainees to these institutes, collects stipend from the industrial partners and reimburses the trainees.

Although the word “pure agent” has not been explicitly mentioned in the agreements but in reality the applicant is acting as a conduit for the payment where the main supply of service is between industrial partners and trainees. Thus, the relationship between provider of service and recipient of service is on principal to principal basis as far as selection, supply and management of trainees is concerned but the relationship between them in respect of other ancillary services (reimbursement of stipend) is that of pure agent.

3.7.2 A “pure agent” also : (b) Neither intends to hold nor holds any title to the goods or services or both, so procured or provided as pure agent of the recipient of supply.

As per the agreements, the applicant only acts as an intermediary for collecting and paying stipend to the trainees on behalf of the industrial partners. In no way, applicant appears to have been benefitted from it. Accordingly, it may be concluded that the applicant neither intends not holds any title to the services provided to the on-site industrial partners.

3.7.3 Further, a Pure Agent (c) Does not use for his own interest, such goods or services so procured.

The services rendered by the Trainees during course of the Training are not received by the Applicant. Such services are rendered by Trainees directly to industrial partners who in return pay stipends to them through the Applicant acting as intermediary. This stipend collected from industrial partner is paid by the Applicant to the trainees without any deductions.

3.7.4 Finally, a Pure Agent : (d) Receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.

In the instant case, the Stipend paid by the applicant to trainees are re-imbursed by the Industry Partner in exact match of the amount paid. In other words no profit is made during reimbursement of the amount. It is envisaged that a separate Administrative Charges are Charged by the Applicant for providing services of processing of Stipend amounts.

3.7.5 Since applicant has fulfilled conditions (a) to (d) in the explanation to Rule 33 which has denied Pure Agent, it may be concluded that the applicant is a Pure Agent. Thus the applicant is acting as a pure agent so far as receiving reimbursement of stipend amounts from the various Trainer Institutes and remitting the same to the trainees is concerned.

3.8 As per Rule 33 of the CGST Rules, 2017, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the conditions mentioned in explanation to rule 33 are satisfied.

3.9 In this regard, it is submitted that the same issue of applicability of GST on stipend is confirmed in case of M/s Cadmaxx Solution Education Trust (GST AAR KARNATAKA) (Advance Ruling No.-KAR-ADRG-85/2009 dated 25.09.2019. Similar facts have been confirmed by Maharashtra Authority for Advance Ruling in identical ARA application No.83 dated 26.12.2019 in case of M/s Yashaswi Academy for Skills.

3.10 In the present case, the applicant is merely acting as a pure agent so far as collection and the payment of stipend to the trainees is concerned. Thus, the applicant’s recovery of such expenses is disbursement and hence does not form a part of value of supply in accordance with rule 33 and hence is excluded from the taxable value of supply. Therefore no G5T is leviable on reimbursement received by the applicant with regard to stipend paid to trainees on behalf of industrial partners.

04. HEARING

4.1 Preliminary e-hearing in the matter was held on 31.05.2022. The Authorized representative of the applicant, Smt. Aditya Maheshwari, Learned CA, Shri. Avijeet Ghoshal learned CA & Shri. Prashant Pachisia Learned Trustee were present. The Jurisdictional officer Shri. Mukesh Rathod, Deputy Commissioner, Nagpur was also present.

4.2 The Application was admitted and final e hearing was held on 17.06.2022. The Authorized representative of the applicant, Smt. Aditya Maheshwari, Learned CA, along with the other representatives were present. The Jurisdictional officer was also present. The Authorised Representative reiterated their submissions in support of their contention and the jurisdictional officer also made submissions.

05. OBSERVATIONS AND FINDINGS:

5.1 We have gone through the facts of the case, documents on record, oral and written submissions made by the applicant and the jurisdictional officer.

5.2 The Question raised by the applicant is “Whether the reimbursement received by 2COMS foundation (applicant) by industry partner, for the stipend paid to students, attract GST?”.

5.3 Section 2 (5) of the CGST Act, 2017, defines the term “Agent” as “a person including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another”

5.4 We find that, the Applicant is registered as a facilitator under the National Employability Enhancement Mission (‘NEEM Scheme’). The details of the NEEM Scheme are mentioned in the subject application and are therefore not reproduced again. The Applicant has submitted that, as a NEEM Facilitator, they are responsible to enroll NEEM trainees (`trainees’) and provide them with on job practical training through various Institutes, Factories, etc. (‘Industry Partners’) to enhance the prospects of their employability. The applicant would enter into Agreements to enroll NEEM trainees (‘trainees’) and provide them with on job practical training through the said Industry Partners.

5.5 Applicant selects trainees for imparting practical training to them & to coordinate between the trainees and the said Industry Partners for the proper implementation of scheme of training envisaged under the Apprentice Act 1961 and for such purpose, enters into a written agreement with the Industry Partners, for identifying and providing relevant eligible trainees to the Industry Partners, for which a fixed administrative fee per trainee per month will be charged from such Industry Partners and on which the applicant accepts that GST is payable.

5.6 With respect to question, regarding payment of Stipend to the Trainees, as per the agreement, a monthly stipend shall be payable to the trainees by the Industry Partners through the Applicant who is required to make such payment to the trainees. As per the agreement, the Applicant shall submit bank statements as a proof of payment of the stipends to the NEEM trainees after monthly invoice clearance by the Industry Partners and shall not keep any mark up / surplus / profit in Stipend amount received from the Industry Partners and the received amount on account of Stipend has to be paid as Stipend to respective trainees for whom the Stipend has been reimbursed by the Industry Partners.

5.7 Further, the applicant will discharge all other functions and duties as are mandated to be performed as a facilitator under NEEM Regulations like Preparation and submission of monthly invoice relating to payment of stipend to the trainees wherein the Invoice is to specifically and separately mention the stipend amount.

5.8 The applicant has submitted that the stipend cost will be recovered from the Industry partners and the entire amount so recovered will be paid to the trainees without any reception from the said amount of stipend, and therefore the stipend paid should be excluded from value of supply and hence the applicant will not be liable to discharge any GST in the stipend amount received for payment to the trainees. The applicant has cited some case laws in support of their contention and has stated that the stipend amount received by them for onward payment is not attributable for services provided by the applicant.

5.9 We find that the applicant, as a NEEM facilitator, is to identify and provide/enrol trainees to the Industry Partners for which they would charge and receive a fixed administrative fee per trainee per month on which they would also discharge GST. The applicant, in lieu of agreements with the industry partners, prepare monthly attendance record of the trainees, processes stipends of the trainees, makes payment of stipend to the trainees and discharge all functions & duties as mandated to be performed as a facilitator under NEEM Regulations including preparation and submission of monthly invoice relating to payment of stipend.

5.10 Regarding the issue in respect of stipend paid to the trainees by the applicant, it has been submitted by the applicant that the concerned Industry Partners will provide training to the trainees and are required to pay stipend to the trainees as per the NEEM Regulations. Even though, it is seen that the services will be provided by the trainees to the Industry Partners, for which stipend is mandated to be paid to the trainees by the Industry Partners, this stipend is not directly paid to the trainees by the said Industry Partners but will be routed through the applicant as per the NEEM Regulations. The entire amounts received as stipend from the Industry Partners will be paid to the trainees without any amount being retained. Thus, the applicant is only acting as an intermediary in collecting the stipend from the Industry Partners and then disbursing the same to the trainees in full without making any deductions from the stipend before disbursement 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 Industry Partners against which stipend is payable. The amount of stipend received by the applicant from the Industry Partners and paid in full to the trainees is not taxable at the hands of the applicant. Hence, in view of the submissions made by the applicant and also in agreement with the observations made by the jurisdictional officer, it is held that the stipend paid by the Industry Partners to the applicant to be further paid to the trainees in full does not attract GST and is not required to be added to the taxable value.

5.11.1 In a similar case of M/s Yashaswi Academy for Skills as well as M/s Patle Eduskills Foundation, this Authority has held that the reimbursement by Industry Partner to the applicant, of the stipend paid to the trainees, does not attract tax under the GST Act.

5.11.2 In both the cases mentioned in para 5.11.1 above, the Applicant Companies were registered as agents under National Employability Enhancement Mission (‘NEEM’) of the Government of India and acted as a facilitator for extending support for mobilizing the trainees under NEEM Scheme of Government of India as per regulations, under notification issued by All India Council for Technical Education (AICTE), for providing on-the-job practical training in industries to trainees to enhance their future employability, and for which they entered into agreements with various companies/ organizations (called as industry partners) to impart actual practical training to the students. In the said cases also, the applicants, in addition to taxable amounts received from its Industry Partners for services rendered, also received Stipends amounts (payable by the Industry Partners to the Trainees) which was paid in full to the trainees.

5.11.3 Since the matters in the Yashaswi Academy case as well as the Patle Eduskills Foundation case decided by this authority are very similar to the facts of the subject case, we have no reason to deviate from our ruling given in the said cases, which are also applicable in the subject case.

06. In view of the extensive deliberations as held hereinabove, we pass an order as follows:

ORDER

(Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)

For reasons as discussed in the body of the order, the question is answered thus –

Question: Whether the reimbursement received by 2COMS foundation (applicant) by industry partner, for the stipend paid to students, attract GST?

Answer: Answered in the negative.