Stipends received from industrial partners and paid in full to trainees are not taxable in the hands of the applicant.
Facts and issues of the case
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 COST Act and MOST Act” respectively by Mis, YASHASWI ACADEMY FOR SKILLS., the applicant, seeking an advance ruling in respect of the following questions.
- Whether the reimbursement by Industry Partner to YAS of the stipend paid to students attracts GST?
- Whether the reimbursement by Industry Partner to YAS of the insurance premium attracts GST?
- Whether the reimbursement by Industry Partner to YAS of the expenses for uniform and safety shoes attracts GST?
Observation of the court
Court has gone through the facts of the case, documents on record, oral and written Submission made by the applicant as well as the written submissions made by the jurisdictional -officer.The applicant withdrew Question nos. 2 and 3 during their oral submissions made on 27.07.2021 and have further confirmed the same vide their correspondence dated 28.07.2021. Hence our discussions will only be in respect of Question No. 1 namely; -Whether the reimbursement by Industry Partner to the applicant, of the stipend paid to students attracts GST”.
Court finds that, the Applicant is registered as a Third Party aggregator as per the provisions of the Apprentice Act 1961 for which it is empanelled with the Ministry of Skill Development and Entrepreneurship, as a -Third Party aggregator”.The Applicant has submitted that, they select trainees and also suitable industrial establishments for imparting practical training to the trainees and to coordinate between them for the proper implementation of scheme of training envisaged under the Apprentice Act 1961. The applicant for such purpose enters into a written agreement with such industrial establishments (industry partner) as per which : the applicant prepares monthly attendance record of the apprentices, getting it certified from the Company ; processes stipends of the apprentices ; makes payment of stipend to the apprentices in their individual bank accounts ; provides uniform and safety shoes (as per requirement of industry partner) to the trainees ; takes Insurance policies towards Employee Compensation and Personal Accident Policy for trainees. For the said services, the applicant receives from the industry partner: fixed professional service charges fees per candidate, per month; reimbursement of Stipend paid to the trainees; reimbursement of actual cost of uniform and safety shoes provided by the applicant to the trainees and reimbursement of the actual cost of Insurance Premium towards Employee Compensation and Personal Accident Policy.
Further, the applicant has also submitted that, the minimum stipend payable by industry to trainee is fixed by the Government considering the nature of work of the trainees and educational qualification of trainee. The applicant is paying GST on the service charges that is received from the industry partners for the supply of services by the applicant. The Jurisdictional officer has submitted that, “the industry partner which is providing on the job training to the trainees is required to pay the stipend to the trainees and the applicant is only acting as an intermediary in collecting the same from the industry partners to the students. The service is provided by the trainers to the trainees as the trainer is liable to make payment of the consideration. This consideration is paid through applicant and the applicant is not allowed to make any deductions in that amount. Hence, the applicant is only a conduit for the payment and the actual service is by the trainers to the trainees. Therefore, the reimbursement by the industry partner to the applicant of the stipend paid to students is not taxable in the hands of the applicant.
Court finds that, the applicant, is empanelled with the Ministry of Skill Development and Entrepreneurship, as a “Third Party aggregator” for mobilizing the trainees under National Apprenticeship Promotion Scheme (NAPS) for providing them on-the-job practical training in various industries, for which they enter into agreements with various companies/ organizations (called as industry partner) who impart actual practical training to the students. The applicant, in lieu of agreements with the industry partners, is engaged in preparing monthly attendance record of the apprentices, getting it certified from the Company ; processing stipends of the apprentices ; making payment of stipend to the apprentices ; providing uniform and safety shoes to the trainees ; taking Insurance policies for trainees towards Employee Compensation and Personal Accident Policy. For all such services rendered the applicant is paid service charge per month per trainee on which GST is being discharged (as per their submissions).
Regarding the issue before us in respect of stipend paid to the trainees by the applicant,the industry partner that provides training to the trainees is required to pay stipend to the trainees. This stipend is not directly paid to the trainees by the companies, rather the same are routed through the applicant. The applicant has submitted that the entire amounts received as stipend from the companies are paid to the trainees without any amount being retained. Thus, the applicant is only acting as an intermediary in collecting the stipend from the companies 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. Hence 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 reimbursement by Industry Partner to the applicant of the stipend paid to students does not attract GST.
Conclusion
For reasons as discussed in the body of the order, the questions are answered thus
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.
Whether the reimbursement by Industry Partner to YAS of the insurance premium attracts GST?
Not answered since question is withdrawn by the applicant.
Whether the reimbursement by Industry Partner to YAS of the expenses for uniform and safety shoes attracts GST?
Not answered since question is withdrawn by the applicant.
