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2022 (12) TMI 359 - AAR - GSTLevy of GST - reimbursement of expenses at actual cost which are incurred by the employee staffs on behalf of Company - applicability of Reverse Charge Mechanism on reimbursement of expenses paid on behalf of the Company at actuals which are incurred by the employee staff who is also a whole-time director Company - time limitation to take input tax credit - HELD THAT:- Services by an employee to the employer in the course of or in relation to his employment are covered under Clause 1 of the Schedule III which relates to the activities or transactions which shall be treated neither as a Supply of Goods nor as a Supply of Services. Hence the services provided by the employees of the Applicant to the Applicant are not a supply. Further, the expenses incurred by the employees are expenses of the applicant and the consideration is payable by the applicant himself and later on reimbursed by the applicant. The amount paid by the employee to the supplier of service represents the amount paid ‘by any other person’ and is therefore covered under the term “consideration” paid by the applicant to the service provider for the services received by the employees on behalf of the company. This amount reimbursed by the applicant to the employee later on would not amount to consideration for the supplies received as the services of the employee to his employer in the course of his employment is not a supply of goods or supply of services in terms of clause 1 of the Schedule III of the CGST Act, 2017 and hence the same is not liable to tax. A director who has taken an employment in the company may be functioning in dual capacities, namely, one as a director of the company and the other on the basis of the contractual relationship of master and servant with the company (employment). As per the circular only part of employee Director’s remuneration which is declared separately other than “salaries” in the Company’s accounts and subjected to TDS under Section 194J of the IT Act shall be treated as consideration for providing services which are outside the scope of Schedule III of the CGST Act, and hence taxable under reverse charge basis. Hence Reverse Charge Mechanism is not applicable on reimbursement of expenses on actuals, to a whole-time director of Company who is also an employee of the company. Whether section 16 (4) of the GST Act, 2017 applies to invoice issued under reverse charge mechanism and also wants to know when can the ITC on payment of tax under RCM be availed? - HELD THAT:- Section 15 (2) of the CGST Act 2017 says about what all shall be included in the value of supply. Based on the same, it is concluded that reverse charge is to be calculated on the gross consideration paid or payable to the supplier, i.e, the values excluding GST.
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