Whether reimbursement by Industry Partner to Third Party Aggregator of stipend paid to trainees, would attract GST? Comprehensive report on MahaGST’s decision

Maharashtra Authority for Advance Ruling (MahaGST): The Bench of Rajiv Magoo Joint Commissioner of Central Tax and T.R. Ramnani, Joint Commissioner of State Tax, decided whether reimbursement by Industry Partner to Third Party aggregator of stipend paid to students would attract GST or not.

Applicant filed the instant application seeking an advance ruling in respect of the following questions:

  1. Whether the reimbursement by Industry Partner to YAS of the stipend paid to students attracts GST?
  2. Whether the reimbursement by Industry Partner to YAS of the insurance premium attracts GST?
  3. Whether the reimbursement by Industry Partner to YAS of the expenses for uniform and safety shoes attracts GST?

Applicant was stated to be registered as a ‘not for profit Company’ under Section 25 of the Companies Act, 1956. The activities of applicant were charitable and hold registration under Section 12 AA of the Income Tax Act, 1961.

Since applicant is a Third Party Aggregator providing support for mobilizing the trainees under the National Apprenticeship promotion Scheme for providing them on-the-job training in industries, it enters into agreements with industry partner who impart actual practical training to the students.

Analysis, Law and Decision 

Firstly, the AAR stated that the two questions for consideration were withdrawn by the applicant, hence the discussions in the present matter will only pertain to: Whether the reimbursement by Industry Partner to the applicant, of the stipend paid to students, attracts GST?

Bench in view of the said issue stated that the industry partner that provides training to the trainees is required to pay stipend to the trainees. The said stipend is not directly paid to the trainees by the companies, rather the same are routed through the applicant. Adding to this, it was stated that the entire amounts received as stipend from the companies are paid to the trainees without any amount being retained. Hence, applicant acts only as the intermediary.

Therefore, AAR held that the applicant is only a conduit for the payment of stipend and the actual service is supplied by the trainees to the trainer companies against which stipend is payable.

Lastly, it was held that 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. [Yashaswi Academy for Skills, In Re., GST-ARA-83/2019-20/B-47, decided on 20-08-2021]

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