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Corporate News *  Missing seized records must be considered while testing ITC claim; duplicate GST demands ordered corrected: Delhi High Court. *  GST appeal can’t be rejected without addressing taxpayer’s grounds: Allahabad High Court. *  Surplus IGST credit can offset CGST, SGST shortfall: GSTAT. *  GST refund can’t be denied when cancelled airfares are returned with tax: GSTAT. *  3 Hearing notices issued within 2 minutes: Gujarat High Court flags portal flaw, seeks report. *  GSTR-9, GSTR-9C filing for FY 2025-26 enabled; pending GSTR-1 and GSTR-3B must be filed first. *  Dupattas are exempt fabrics, can’t be taxed as fibres at 4%: Madras High Court. *  Full transitional credit allowed on capital goods received after GST rollout: GSTAT denies Rs. 6.99 lakh export duty credit. *  GST return mismatch alone can’t justify fraud proceedings: GSTAT orders fresh adjudication under section 73. *  Supplier found non-existent later can’t alone justify input tax credit denial: GSTAT. *  GST interest stops once tax reaches government account, can’t run until return filing: GSTAT. *  Cancelled flat booking- GST refund can’t be denied without excluding COVID period from limitation: GSTAT. *  India notifies rules of origin for India–New Zealand FTA. *  Incomplete E-bike kits classifiable as complete vehicles, but not eligible for CKD duty concession: CESTAT. *  Same GST rate on main input and output can’t by itself bar inverted duty refund: GSTAT. *  Unjust enrichment doesn’t apply to customs refunds from assessments finalised before July 13, 2006: Gujarat High Court. *  CENVAT credit can’t be denied solely because plant And machinery are embedded in earth: Karnataka High Court. *  DFIA exports ineligible for RoDTEP benefits; customs directs repayment with applicable interest. *  Second E-Way bill alone doesn’t prove another supply: GSTAT. *  Bail denied in Rs. 1.19 crore fake GST refund case over risk of accused absconding again: Punjab and Haryana High Court. *  GST registration can be restored after revocation deadline if outstanding dues are paid: Gauhati High Court. *  Multiple GST proceedings over same suppliers: Calcutta High Court directs dept. to share findings for adjudication. *  E-Governance portal services not OIDAR, fixed deposit interest not taxable: CESTAT. *  Rs. 500 Stamp duty required on authority letters for CAs, CMA and GST practitioners in Pune GST division.  *  Rs. 1.10 crore GST refund must be paid in cash after business closure: Allahabad High Court. *  Godown rent attracts 18% GST even when used exclusively for exempt agricultural warehousing: AAR. *  GST portal launches "Multi-State Registration" facility: one master TRN for registration applications across multiple States/UTs. *  RoDTEP scheme extended till 31st December, 2026.  *  Mere disagreement with order can’t override Rs. 20 lakh appeal limit: GSTAT. *  Customs interest can’t be backdated before confiscation liability is determined; nearly 8 year period excluded: Delhi High Court.
Subject News *  GST summons: anticipatory bail maintainable without arrest order, but relief denied in evasion case: Allahabad High Court. *  GST Appeal can’t be decided without hearing taxpayer’s objections to fresh evidence: Allahabad High Court. *  GST ITC can’t be reversed merely because supplier grants discount without reducing tax liability: GSTAT. *  Mere quoting of GST provision is not a valid charge: GSTAT quashes ITC denial. *  Personal hearing mandatory before adverse GST order, even without taxpayer’s request: Rajasthan High Court. *  Parallel bail pleas without full disclosure amount to abuse of process Rs. 43.08 crore GST case sent for fresh hearing: Supreme Court. *  GST refund based on unchallenged advance ruling can’t be recovered using later circular: GSTAT. *  Payment of GST alone doesn’t end interest and penalty liability when tax and interest remain unpaid beyond 30 days of notice: GSTAT. *  GST demand over builders’ 80% procurement rule requires reasoned adjudication: GSTAT. *  Eligible ITC doesn’t automatically entitle taxpayers to compensation cess refund on domestic sales: GSTAT. *  GST confiscation order passed before reply deadline invalid: GSTAT. *  GST interest can’t be retained after tax refund on delayed export receipts: Punjab & Haryana High Court. *  GST appeal can’t be dismissed over pre-deposit shortfall without opportunity To respond: Bombay High Court. *  DGGI SCN can’t be challenged before reply and adjudication:Chhattisgarh High Court. *  GST input tax credit can’t be denied solely due to supplier’s retrospective registration cancellation: GSTAT. *  GST notice must explain fraud allegations; merely repeating section 74 Is not enough:  Himachal Pradesh High Court. *  Audit detection alone can’t justify GST fraud penalty; specific suppression must be proved: GSTAT. *  GST order uploaded only under ‘Additional Notices’ tab without separate intimation set aside: Calcutta High Court. *  Service Tax appeal can’t be rejected for missing pre-deposit proof when payment is already recorded: CESTAT. *  SGST dept. can’t hear appeal against CGST order: Calcutta High Court. *  Mere dispatch of tax order can’t prove service or make appeal time-barred: CESTAT. *  Dealer incentives can’t be taxed merely on ledger entries: CESTAT. *  DGFT orders quashed for failure to supply DRI letter relied upon in SCN: Bombay High Court. *  GST penalty u/s 122(1A) can’t apply to Pre-2021 transactions; unregistered beneficiaries also covered: Delhi High Court. *  Expired E-way bill caused by wrong PIN code can’t justify GST penalty without intent to evade tax: GSTAT. *  Used railway rails can’t be taxed as track material without proof they are fit for reuse: CESTAT. *  Earlier DGGI notice doesn’t bar separate GST demand on different issue: Delhi High Court. *  ITC dispute involves no question of law: GSTAT directs appeal to Vice-President. *  Earlier DGGI notice doesn’t bar separate GST demand On different issue: Delhi High Court. *  No E-way bill required for interstate goods movement in november 2017: GSTAT quashes detention and penalty.  

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GST UPDATE No 213 ON TAXABILITY OF REIMBURSEMENT OF STIPEND TO TRAINEES

GST UPDATE No 213 ON TAXABILITY OF REIMBURSEMENT OF STIPEND TO TRAINEES
The dispute as regards taxability of reimbursement of expenses has its roots from erstwhile service tax regime. There are numerous services which involve incurring of expenditure by the service provider and claiming reimbursement from the service recipient as the ultimate burden of such charges is to be borne by the service recipient. Recently, similar issue regarding taxability of reimbursement of stipend paid to the trainees was raised before Maharashtra AAR in the case of M/S PATLE EDUSKILLS FOUNDATION. The outcome of this decision is the subject matter of discussion of our present GST update.
 
The applicant is engaged in the business of Human Resource & Skill Development and is a facilitator under the National Employability Enhancement Mission (NEEM Scheme) of the Government of India. The applicant is responsible to enroll NEEM trainees and provide them with on job practical training through various Institutes, Factories, Hospitals, College, Trusts etc. to enhance the prospects of their employability. As per the agreement, applicant identifies and provides to Trainer Institutes, relevant trainees who can work at the said organizations and obtain “on job practical training” so as to enhance their chances of employability and for which, the applicant charges a fixed fee of Rs. 1500/- per trainee per month from such Institutes on which GST is levied and paid. Further, in terms of the agreement, the trainer institutes are also 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 Trainer Institutes pay the stipend amount to the applicant who in turn reimburses it to the trainees. The applicant is charging GST only on the amount of service charges charged to the Trainer Institutes and not on the stipend amount collected from such Institutes.
 
The applicant contended that the stipend amount is being collected by them in the capacity of a pure agent without any profit element so the same should be excluded from the taxable value of its service. Reliance was placed on various judicial pronouncements

such as DRS Marine Services Pvt. Ltd.  [2019 (20) GSTL 471 (AAR-GST)], Arivu Educational Consultants Pvt. Ltd. [2020 (32) GSTL 353 (AAR-GST KAR.)], Asiatic Clinical Research Pvt. Ltd. [2020 (33) GSTL 42 (AAR-GST KAR.) and Cadmaxx Solutions Education Trust [2020 (32) GSTL 49 (AAR-GST-KAR)]. Moreover, as per the agreement between the applicant and trainer institute, the legal liability to pay stipend to the trainees is cast on the trainer institute and the applicant only acts as the medium of payment/remittance of stipend to the trainees. Hence, such stipend would not fall under section 15(2)(b) of the CGST Act, 2017 and should not be included in the taxable value.  

 

The AAR accepted the submissions of the applicant and held that the amount of stipend received by the applicant from the entities/training institutes and then disbursing the same to the trainees in full without making any deductions from the stipend is to be treated as covered by the concept of ‘pure agent’ so not required to be added to the taxable value. Reliance was placed on the decision given by the same AAR in the case of M/s Yashaswi Academy for skills wherein it was 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.

 

The concept of expenses incurred as pure agent comes into picture in number of services such as payment of toll charges in case of hiring of motor vehicles, travelling expenses of consultant, reimbursement of ESI/PF in case of supply of manpower services etc. The charges paid to third party by the service provider during the course of providing the service and claiming reimbursement of the same from the service recipient on actual basis is not to be included in the taxable value of service. It is pertinent to mention here that similar controversy prevailed in the erstwhile service tax regime wherein Rule 5 of the Service Tax Determination of Rules, 2006 providing for inclusion of any reimbursement expenditure or cost incurred by service provider in the course of providing taxable service was declared as ultra vires by the Supreme Court in the case of UNION OF INDIA VERSUS INTERCONTINENTAL CONSULTANTS AND TECHNOCRAFTS PVT. LTD. However, the government resorted to amendment in Budget 2015 wherein reimbursable expenditure was made includible in the value of taxable service for the purpose of levy of service tax. It is appreciable that the decision of the Advance Ruling is rendered in favour of the taxpayer.

such as DRS Marine Services Pvt. Ltd.  [2019 (20) GSTL 471 (AAR-GST)], Arivu Educational Consultants Pvt. Ltd. [2020 (32) GSTL 353 (AAR-GST KAR.)], Asiatic Clinical Research Pvt. Ltd. [2020 (33) GSTL 42 (AAR-GST KAR.) and Cadmaxx Solutions Education Trust [2020 (32) GSTL 49 (AAR-GST-KAR)]. Moreover, as per the agreement between the applicant and trainer institute, the legal liability to pay stipend to the trainees is cast on the trainer institute and the applicant only acts as the medium of payment/remittance of stipend to the trainees. Hence, such stipend would not fall under section 15(2)(b) of the CGST Act, 2017 and should not be included in the taxable value.  

 

The AAR accepted the submissions of the applicant and held that the amount of stipend received by the applicant from the entities/training institutes and then disbursing the same to the trainees in full without making any deductions from the stipend is to be treated as covered by the concept of ‘pure agent’ so not required to be added to the taxable value. Reliance was placed on the decision given by the same AAR in the case of M/s Yashaswi Academy for skills wherein it was 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.

 

The concept of expenses incurred as pure agent comes into picture in number of services such as payment of toll charges in case of hiring of motor vehicles, travelling expenses of consultant, reimbursement of ESI/PF in case of supply of manpower services etc. The charges paid to third party by the service provider during the course of providing the service and claiming reimbursement of the same from the service recipient on actual basis is not to be included in the taxable value of service. It is pertinent to mention here that similar controversy prevailed in the erstwhile service tax regime wherein Rule 5 of the Service Tax Determination of Rules, 2006 providing for inclusion of any reimbursement expenditure or cost incurred by service provider in the course of providing taxable service was declared as ultra vires by the Supreme Court in the case of UNION OF INDIA VERSUS INTERCONTINENTAL CONSULTANTS AND TECHNOCRAFTS PVT. LTD. However, the government resorted to amendment in Budget 2015 wherein reimbursable expenditure was made includible in the value of taxable service for the purpose of levy of service tax. It is appreciable that the decision of the Advance Ruling is rendered in favour of the taxpayer.

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