RCM on Non -executive director Commission, Goods and Services Tax - GST

[Ashwin Bhalakiya]

My friends company is paying commission to their Non- Executive directors. They provided commission entry in books in FY 2020-21, the same got approved in Board meeting which is held in July-2021 & payment was made to director on 7th Aug 2021. Company Paid GST on RCM on 20th Sept 2021. Now Government GST officer raise the query that the company has paid the GST on RCM in Sept-2021, which is liable for interest for delay payment of GST. We would like to know the legal provision of the act. Whether RCM is to be paid on Provision or on Actual payment basis.

Posts / Replies

[KASTURI SETHI]

The department's objection is legally correct.You need to go through the meaning of 'consideration' as defined under Section 2(31) of CGST Act which is extracted

(31) “consideration” in relation to the supply of goods or services or both includes -

(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;

 

[Shilpi Jain]

Section 13(3) of the CGST Act is the provision to decide when the liability to pay tax arises. In the present case, liability under RCM arises when the payment was made by the Company. In the present case no delay so no interest.

3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely:––

(a) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or

(b) the date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu there of by the supplier: