TMI Blog2021 (1) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... rse charge basis; and (ii) the part of Director s remuneration which are declared as Salaries in the books of a company and subjected to TDS under Section 192 of the IT Act, are not taxable being consideration for services by an employee to the employer in the course of or in relation to his employment in terms of Schedule III of the CGST Act, 2017 - it is further clarified that the 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 as Fees for professional or Technical Services shall be treated as consideration for providing services which are outside the scope of Schedule III of the CGST Act, and is therefore, taxable. Further, in terms of notification No. 13/2017 - Central Tax (Rate) dated 28.06.2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis. The remuneration, if any, paid by the appellant to the independent directors or those directors who are not the employee of the appellant is taxable in hands of the appellant, on reverse charge basis. Further, the part of Director s re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling under chapter heading No. 69111011, 49081000, 84801000 84801000 of the Tariff. They are registered with Goods Services Tax department and are having GST registration No. 08AAACC6866DIZO. 3.2 Presently Board of Directors of the appellant company consists of six (6) directors. It has been submitted that all the above-mentioned Directors are performing all the duties and responsibilities and duties as required under the laws. However along with that these all directors are also working in the company at different level of management in the company and each one of them is holding charge of procurement of raw material, production, quality checks, dispatch, accounting etc. In other words, they are also working as an employee of the company for which they are being compensated by the company by way of regular salary and other allowances as per the company policy and as per their employment contract. In fact, these Directors are treated at par with any other employee of the company as far as their employment is concerned. The company is deducting TDS on their salary and PF laws are also applicable to their service. Therefore, for all practical purposes, these directors are the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been ruled that the consideration paid to Directors would attract GST under reverse charge mechanism. 4.3 However the point submitted by the appellant was that whether the salary paid to the Directors who are working whole time in the company and were paid salary under a contract of employer employee, would attract GST under Reverse Charge Mechanism (hereinafter also called as the RCM). 4.4 It is submitted that Directors of the appellant company are working whole time for the company and their employment has been effected under a service contract of employer employee. Therefore they are in all practical purposes employee of the company. As submitted supra, the company have been deducting TDS and EPF from their salary as required under the Income tax laws and EPF provisions. 4.5 It is submitted that the term whole term Director has been defined under The Companies Act, 2013 as whole-time Director includes a director in the whole-time employment of the company . This definition clarifies that a Director can be an employee of the company. Further the appellant refer to the judgment in Ramaben A. Thanawala vs Jyoti Ltd And Othrs (AIR 1958 BOM 214, (1957) 59 BOMLR 67 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a body corporate to the said company or the body corporate. A Director of a company or a body corporate The company or a body corporate located in taxable territory 4.8 From the above provision it is amply clear that both in Service tax as well as in GST laws the provision for reverse charge payment of tax are similar therefore the intention of the legislation was same under GST provisions as it was under Service Tax laws. 4.9 The appellant relies in the case of Rent Works India (P) Ltd. Vs Commissioner of C. Ex., Mumbai 2016(04) LCX0103 Tri. Mumbai = 2016 (5) TMI 786 - CESTAT MUMBAI wherein the Hon ble Tribunal has held as under: Para 7. On perusal of the agreement with Mr. Alan Van Niekerk, we find that the said agreement is between appellant and one Mr. Alan Van Niekerk for rendering the services to appellant on the management of market and exclusive services. The said agreement provides for payment of an amount as monthly remuneration of Mr. Alan Van Niekerk and as also additional amount at the discretion of the board as percentage to Alan Van Niekerk. It is seen from the records and more specificall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he salaries paid by the appellant company to their whole time Directors being chargeable to GST under Reverse Charge mechanism is faulty one and need to be reversed. 4.12 Further in respect of RCM under erstwhile Service Tax regime, circular No. 24/2012 dated 09.08.2012 was issued, wherein it was stated that: The Finance Act, 2012 has introduced Service Tax which is applicable to anyone who provides a service not covered under the negative/exempted list and if the value of the service annual revenue is more than ₹ 10 Lakh. The Non-Whole Time Director of the Company are presently not covered under the exempted list and as such, the sitting fee/commission payable to them by the company is liable to service tax. 4.13 The above circular makes it clear that only in respect of payments made to non-whole time Directors (who are not director employee of the company working regularly for the company), service tax liability arise to the company. 4.14 There is no difference in legal provision for the taxability in respect of directors of a company under GST and Service Tax laws therefore the interpretation / rulings and clarification issued under the Service Tax would ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is declared separately other than salaries in the Company s accounts and subjected to TDS under Section 194J of the IT Act as Fees for professional or Technical Services shall be treated as consideration for providing services which are outside the scope of Schedule III of the CGST Act, and is therefore, taxable. Further, in terms of notification No. 13/2017 - Central Tax (Rate) dated 28.06.2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis. 6.5 Hence, we find that remuneration, if any, paid by the appellant to the independent directors or those directors who are not the employee of the appellant is taxable in hands of the appellant, on reverse charge basis. Further, the part of Director s remuneration which are declared as Salaries in the books of the appellant and subjected to TDS under Section 192 of the IT Act, are not taxable being consideration for services by an employee to the employer in the course of or in relation to his employment in terms of Schedule III of the CGST Act, 2017. The part of employee Director s remuneration which is declared separately other than salaries in the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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