GST Vidhi | GST Advance Ruling

GST on Stipend Disbursement and Sale of Uniforms by Third-Party Aggregator – Logskim Solutions Pvt. Ltd.

M/s Logskim Solutions Private Limited, a Chennai-based third-party aggregator facilitating apprenticeship training under NAPS and NATS schemes, approached the Tamil Nadu Authority for Advance Ruling (AAR) to determine the GST implications on three activities: (i) disbursement of stipends received from industry partners to trainees, (ii) sale of uniforms and shoes, and (iii) provision of insurance services, all done without markup. The applicant contended they acted as a 'pure agent' for these expenses, especially in disbursing stipends, and hence sought exclusion from GST. However, the AAR rejected the claim of pure agent status, holding that the stipend disbursements and recovery of other expenses were not mere reimbursements under Rule 33 of the CGST Rules, 2017. Consequently, GST was held applicable on all such transactions except for a procedural query, which the AAR declined to answer.

·       Advance Ruling Number: 02/ARA/2025

·       Date of Ruling: 06 February 2025

·       Ruling Authority: Authority for Advance Ruling, Tamil Nadu
Members:

·       Name of Applicant: M/s Logskim Solutions Private Limited

Summary of Advance Ruling:

The Authority held that:

1.    Stipend amounts received from industry partners and disbursed to trainees are taxable under GST, as the applicant does not qualify as a pure agent under Rule 33 of the CGST Rules.

2.    The sale of uniforms, shoes, and insurance premiums, even if done at cost without markup, is chargeable to GST, as these are taxable supplies.

3.    The Authority declined to answer a general legal interpretation query as it did not fall under the permitted scope under Section 97(2) of the CGST Act.

Questions Raised Before the Authority:

1.    Whether the stipend received from industry partners and paid to trainees without deduction is taxable under GST?

2.    Whether the sale of uniforms, shoes, and insurance premiums to industry partners at cost without markup is taxable under GST?

3.    Whether the applicant's interpretation of law in point 16 of the application is correct?

Relevant Legal Provisions:

• Section 97(2)(e) – Determination of liability to pay tax
• Rule 33 – CGST Rules, 2017 – Value of supply in case of pure agent
• Section 103 & 104 – Binding nature and voidability of advance rulings

Applicant’s Submissions:

• Acts as a third-party aggregator under NATS and NAPS schemes.
• Facilitates engagement of trainees by industry partners and receives stipends which are passed on to apprentices without any deductions.
• Also procures uniforms, shoes, and insurance for trainees and charges the cost to the industry partners.
• Claimed exemption for stipend payments under pure agent concept, citing similar AARs from Maharashtra and Karnataka.
• Submitted that all such payments are pass-through and should not be included in taxable turnover.

Discussion and Findings by AAR:

On Stipend Disbursement:

• The applicant did not fulfill all conditions of a 'pure agent' under Rule 33, including:
• No payment made to a third party on behalf of the recipient.
• No contractual agreement that explicitly appoints them as a pure agent.
• No separate indication of stipend amount in invoice for exclusion.
• The stipend is an incentive mandated by the Central Apprenticeship Committee and paid to trainees, but the applicant only routes the payment, and hence does not incur it as their cost.
• Cited rulings (e.g., KAR/AAAR/04/2022) held that stipend paid in this manner is not excludible from taxable value.

On Uniforms, Shoes & Insurance:

• Applicant admitted during hearing that only stipend is recovered without markup; other items include markup.
• Thus, the pure agent claim fails for uniforms, shoes, and insurance also.
• Such supplies qualify as taxable outward supplies under CGST Act, regardless of whether profit is earned.

On Interpretation Query:

• The third query was declined as it does not fall under any clause (a) to (g) of Section 97(2) and was too general to be answered.

Ruling (Answers to the Questions):

1.    Yes – The amount of stipend received and disbursed to trainees is chargeable to GST under the CGST/TNGST Acts, 2017.

2.    Yes – The sale of uniforms, shoes, and insurance premium to industry partners is also chargeable to GST, even if at cost.

3.    Not Answered – The query seeking validation of the applicant's interpretation of law was outside the scope of an Advance Ruling and hence not addressed.

Conclusion:

The Tamil Nadu AAR firmly ruled that stipends, uniforms, shoes, and insurance costs handled by M/s Logskim Solutions Pvt. Ltd. do not qualify for exclusion from GST under the pure agent concept. These services are taxable, and the entity must include such amounts in its taxable turnover. The case reinforces that procedural conditions of Rule 33 must be strictly fulfilled to qualify as a "pure agent."

Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.

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