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GST officials seek directors’remuneration information

GST officials seek directors’remuneration information

Goods and services tax authorities in some states have sent notices to companies seeking information about the remuneration of directors and the tax paid on them.

This comes as only a few companies have started operations following the staggered opening up of the nationwide lockdown to counter the Covid-19 outbreak.

The inquiries come on the heels of conflicting orders passed by the Authority of Advance Ruling in two states on the applicability of GST on the remuneration of directors. The AAR Rajasthan said director remuneration is under the ambit of GST, while the AAR Karnataka ruled it was not.

“The conflicting advance ruling judgments on GST applicability on director’s remuneration has caused doubt in the minds of authorities at the field level, potentially causing unnecessary litigation,” said Bipin Sapra, a partner at .

The tax authorities in states including Chhattisgarh, Uttar Pradesh and Maharashtra have sent out the notices seeking information, said people familiar with the matter.

In some cases, companies have been sent a memorandum, asking them to provide documents detailing the GST paid on the remuneration of directors since July 1, 2017, along with the amounts given to the directors. Companies have been warned of action against them if the information isn’t furnished within a week.

ET has seen a copy of the memorandum sent out on May 12.

The issue has significant ramifications for companies, especially in the services sector, where they need individual registration in each state.

“Even though AAR ruling applies only to applicants who seek clarity on interpretation of laws, still authorities in different tax jurisdictions are taking cognisance of this ruling and issuing notices,” said Rajat Mohan, a senior partner at Associates.

Experts have sought expeditious clarification on the issue. If the GST Council issues a clarification, it will put the matter to rest, Mohan added.

Source: Economic-Times

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GST on director salaries: Firms receive notices despite diverse AAR rulings

GST on director salaries: Firms receive notices despite diverse AAR rulings

Even as authorities of advance rulings (AARs) differ on the liability to pay the GST on salaries paid by firms to directors, some states have already started issuing notices to companies asking them to provide details of the GST paid through reverse charge on such remunerations.

One of the notices seen by FE has been issued by the GST administration in Chhattisgarh to a company asking it to disclose the GST paid on the remuneration received by directors of the company since July 1, 2017. It fails to make any distinction between executive or non-executive directors.

The notice follows despite the Karnataka Bench of AAR ruling that came earlier this month, saying an executive director provides services to a company as an employee does to the employer, and the same can’t be treated as supply of services according to the GST Act. However, it said that a non-executive director, who doesn’t receive remuneration from the company as an employee and only gets fees for attending board meetings would be required to pay the GST on such fees through the reverse charge mechanism.

In April, the Rajasthan Bench of AAR had ruled that remuneration paid to directors of a company would be subject to the GST. The ruling was contradicted by the Karnataka AAR a month later.

Although AAR ruling is applicable only to applicants who seek clarity on interpretation of laws, experts said GST authorities are taking conginazance of such ruling while issuing notices in similar matters.

“Divergent views on taxation of director salary by two state advance ruling authorities were already enough of a nuisance for taxpayers. Adding to the woes of taxpayers, officers under other jurisdiction have already initiated issuing notices to taxpayers on the same issue,” Rajat Mohan, senior partner, AMRG & Associates, said.

He added that ruling by an AAR should not form the basis for issuing tax notices in other tax jurisdictions, but tax officials are indulging in it without ‘application of mind’, causing anguish to the ailing industry already suffering from the pandemic.

To deal with conflicting ruling by two state AARs, the GST Council in December 2018 had approved setting up of a centralised Appellate Authority for Advance Ruling. This was ratified by the Cabinet a month later.

Source: Financial-Express.

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Transfer of under Construction Project do not attract GST: AAR

Transfer of under Construction Project do not attract GST: AAR

The Authority of Advance Ruling (AAR), Uttrakhand ruled that the transfer of under-construction projects under the ‘Business Transfer Project’ is exempted under Goods Service Tax (GST).

The applicants, M/s Rajeev Bansal and Sudershan Mittal are engaged in the business of constructing and selling residential and commercial complexes. The applicant firm came into existence, particularly for the project.

On perusal of the sale deed, the applicant has sold the under-construction building, with its all assets and transfers the rights of the same to the buyer including the approved map from the competent authority. The buyer has purchased the under-construction building to carry on the same kind of business as the purchaser themselves engaged in constructing residential/commercial complexes and selling.

The applicant sought for an advance ruling on the issue whether business transfer agreement as a going concern which consists of transferring under construction building project is covered under S. No. 12 of the Notification No. 12/2017 Central Tax (Rate) and is thus exempt from the applicability of Goods and Service Tax (GST) or not?

The Authority of Advance Ruling (AAR) consisting of the members Vipin Chandra and Amit Gupta, while relying on the definition of ‘business’ under Section 2(17) of the Act noted, “From the definition of the “business” we find that the acquisition of goods/ services for commencement of business is covered under the said definition. We observe that a transfer of a business as a going concern is the sale of a business including assets.

In terms of financial transaction ‘growing concern’ has the meaning that at the point in time to which the description applies, the business is live or operating and has all parts and features necessary to keep it in operation. Thus ‘Transfer of a going concern’ in a simple way can be described as the transfer of a running business which is capable of being carried on by the purchaser as an independent business.”

“The transfer of under-construction projects under ‘Business Transfer Project’ are exempted under Goods Service Tax (GST),” the authority said.

Source: TaxScan

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12% GST applicable on Printing and Supply of Textbooks to Government Departments: AAR

12% GST applicable on Printing and Supply of Textbooks to Government Departments: AAR

The Authority of Advance Ruling (AAR) held that 12% of Goods and Service Tax (GST) is applicable to printing and supply of textbooks to government departments which are registered under Goods and Service Tax (GST) Acts, 2017.

The applicant, M/s Department of Printing, Stationery and Publication are a Government Press under the control and supervision of the Primary and Secondary Education Secretariat to cater to the Printing and Stationery requirements of the State Government offices namely Governor’s Office, Legislature, Government Secretariat, High Court, and Other Government Departments.

The applicant approached the Advance Ruling Authority on three grounds, namely, (i) whether GST exemption is granted to the activity of printing & supply of textbooks & printed materials, provided by the applicant to various Departments of Government of Karnataka? (ii) Whether the textbooks supplied to public or recognized bookstalls eligible for exemption?  and, (iii) the rate of tax applicable to these services if they are subject to taxation.

The Authority of Advance Ruling (AAR) consisting of Additional Commissioner of Commercial Tax, Dr. Ravi Prasad and Joint Commissioner of Central Tax, Mashood ur Rehman Farooqi held that these services are not eligible for GST exemption and 12% of Goods and Service Tax (GST) is applicable on the activity of printing and supply of textbooks to government departments which are registered under Goods and Service Tax (GST) Act.

However, the authority clarified that in the case of the printing and supply of textbooks to government departments that are not registered under the Goods and Service Tax (GST) Act, the applicant is exempted from the liability to pay tax.

Source: TaxScan.

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No GST Registration Needed for Co-Owner in AoP until the Turnover Reached the Threshold Limit: AAR

No GST Registration Needed for Co-Owner in AoP until the Turnover Reached the Threshold Limit: AAR

The Authority of Advance Ruling in West Bengal has ruled that, GST Registration is not needed for Co-Owner in Association of Persons ( AoP ) until the turnover reached the Threshold limit under the GST Act, 2017.

The Applicant is one of the co-owners of immovable property, jointly owned by three individuals. All three co-owners, including the Applicant, hold an equal share in the property. The property is let out to CGST & CX, Chandannagar Division. Total rental received exceeds the threshold provided under section 22(1) of the GST Act, but the share of each of the three co-owners does not cross the said threshold.

The Applicant seeks a ruling on whether he and the other two co-owners are to be treated as an association of persons or a body of individuals and, therefore, a person as defined under section 2(84)(f) of the GST Act, who is required to be registered under section 22(1) of the Act.

The AAR observed that, “the Applicant and the other two co-owners cannot be treated as an association of persons and, therefore, as a person defined under section 2(84X0 of the GST Act, where their income from renting is separately ascertainable and assessed for income tax individually at the hand of each co-owner. Whether the Applicant is required to be registered under section 22(1) of the GST Act will, therefore, depend on his gross turnover, ascertained separately from the other co-owners, exceeding the threshold as provided under the Act”.

Source: TaxScan.

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No GST on Collecting Exam Fee from Students and Remitting same to that Particular University: AAR

No GST on Collecting Exam Fee from Students and Remitting same to that Particular University: AAR

The Authority of Advance Ruling ( AAR ) in Karnataka has ruled that, the activity of collecting exam fee (charged by any university Or institution) from students and remitting the same to that particular university or institution without any value addition to it is a service as a pure agent and hence the value is excluded from the taxable value of the applicant as per Rule 33 of the Central GST Rules / Karnataka GST Rules, hence exempted from Goods and Services Tax ( GST ).

The Applicant provides coaching, learning and training services in relation to under-graduate, graduate and post-graduate degree, diploma and professional courses on a standalone bases to students or for any institution, corporate, company, institutes, universities and colleges in the subject and branches of all types of disciplines such as commerce, hardware, software, computer, science, arts, business management, engineering, medical, industrial, pharmacy, mining, military, dance, acting, sports, journalism and any other ‘field of education and set up of coaching and training classes/ centers in relation to the same.

The AAR observed that, “The applicant is collecting the exact amount payable to institute or college or universities as exam fee from the students (service recipient) and remits the same amount to the respective institute or college or universities (third party) without any profit element or additions, on the authorization of the student. This payment is separately indicated in the invoice issued to the respective students. The applicant providing this kind of services to the student in ‘addition to the services as training and coaching institute. Hence the applicant satisfies all the conditions of the pure agent as narrated in Rule 33 of the COST Rules, 2017. Therefore, amount of the fee collected by the applicant from the student as exam fee which is remitted to the respective institute or college or universities is excluded from the value of supply”.

Source: Taxscan

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GST applicable on Interest / Late Fee / Penalty due to delayed payment of consideration received after its imposition: AAR

GST applicable on Interest / Late Fee / Penalty due to delayed payment of consideration received after its imposition: AAR

The Chennai Bench of Authority of Advance Rulings ( AAR ) in an application filed by M/s Chennai port Trust held that interest, late fee and penalty due to delayed payment of consideration received after imposition of GST liable to GST.

The applicant is engaged in the supply of port services and incidental supply of goods like disposal of discarded assets. They are notified as a major port by the Central Government under the Indian ports Act, 1908. The applicant has collected an amount as interest / late fee/penalty for delayed payment of consideration for the original service. This amount was received after July 1st, 2017 and separate invoices Rent Claim Advance (RCA) Receipt are raised by the applicant.

The issue in the present case is the determination of the applicability of GST on receipt of interest, late fee, a penalty by the applicant.

The applicant has contended inapplication of GST on the ground that the supply is a continuous supply of services rendered before July 2017 i.e. introduction of GST.

The bench constituting of Members Ms M.G. Kata and T.K. Selvaan held that the amounts received on or after 01.07.2017 towards interest, late fee, penalty relating to the services of lease/rent, due to delayed payment of consideration for those services rendered by the applicant before 01.07.2017, are liable to GST. It has been held that there is a payment of a separate consideration for this tolerance of delayed payment of lease/rent. Thus, this tolerance on the part of the applicant for the delayed payment of lease/rent by collecting an interest/late fee/penalty is a separate supply of service as covered by Section 7(1)(a) of the CGST Act.

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Source: TaxScan.
No GST on Reimbursement of Expenses to Employee by Employer: AAR

No GST on Reimbursement of Expenses to Employee by Employer: AAR

The Authority of Advance Ruling ( AAR ) in Karnataka has ruled that, the amounts paid to the employees of the applicant company as reimbursement of expenses incurred by them in the course of employment of the applicant company are not liable to tax under the provisions of the Goods and Services Tax Act, 2017 as the transaction of the services supplied by a supplier to the employee and paid by the employee is liable to tax after 30.09.2019.

The AAR also ruled that, the remuneration paid to the Director of the applicant company is liable to tax under reverse charge mechanism under sub-section (3) of section 9 in the hands of the applicant company as it is covered under entry no. 6 of Notification No. 13/2017- Central Tax (Rate) dated 28.06.2017.

The applicant has been examined and its found that the applicant’s employees incur expenses on behalf of the company in the course of employment and the said amounts are reimbursed by the applicant on a periodical basis. These expenses are incurred by the applicant and are only paid by the employee and later on reimbursed to the employee by the applicant. The issue is whether the amount paid as reimbursement of the expenses paid by the employee amounts to supply liable to tax.

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 AAR observed that, “The amount paid by the employee to the supplier of service is covered under the term “consideration” as if it is paid by the applicant himself for the services received by them 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 and hence the same is not liable to tax. However, if any tax is applicable, it is on the services received by the employee on behalf of the applicant in the course of his employment, irrespective of the fact that it is paid by the applicant or the employee and later reimbursed by the applicant”.

Regarding the remuneration to the Directors paid by the applicant, the services provided by the Directors to the Company are not covered under clause (1) of the Schedule III to the Central Goods and Services Tax Act, 2017 as the Director is not the employee of the Company. The consideration paid to the Director is in relation to the services provided by the Director to the Company and the recipient of such service is the Company as per clause (93) of section 2 of the CGST Act and the supplier of such service is the Director.

Source: TaxScan.

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18% GST applicable to Works Contract of Residential Quarters, rules AAR

18% GST applicable to Works Contract of Residential Quarters, rules AAR

The Authority of Advance Ruling ( AAR ) in Madhya Pradesh has ruled that, 18% Goods and Services Tax ( GST ) applicable to Works Contract of Residential Quarters.

The AAR has clarified the rate of GST on contract for Construction of building and structure for colony a village Siveria at 2 x 660 MW Shree Singaji Thermal Power Project Stage – II Khandwa.

The AAR observed that the issue before us is squarely covered under Section 97(2)(a) of the Act and therefore we admit the application for consideration.

The authority vide order dtd.18.10.2018 had ruled that “The works contract service of construction of 599 residential quarters allotted to the applicant (Shreeji Infrastructure P.Ltd.) by MPPGCL will merit classification under SAC 9954 and would attract GST @18% (9%CGST + 9%SGST)”.

Construction of residential quarters, though within the precincts of Power Plant’ cannot by any stretch of argument and imagination be termed as the work entrusted to the applicant.

The AAR also observed that, the GST will be applicable @18% under SAC 9954, in as much as it refers to the construction of residential quarters, which was awarded to M/s.Shreeji Infrastructure P.Ltd., as already ruled vide our order no.15/2018 dtd.18.10.2018.

Source: TaxScan.

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Participation Fees for Conference Organized by Educational Institutions leviable to GST: AAR

Participation Fees for Conference Organized by Educational Institutions leviable to GST: AAR

The Madhya Pradesh Authority of Advance Ruling in an application filed by M/s Emrald Heights international School held that GST shall be leviable on consideration received by the school for participation in a conference organized.

The issue before the Authority is whether the consideration received by the school from the participant school(s) for the participation of their students and staff in the conference would be exempted under Entry No. 66/1/80 of the Notification No. 12/2017-Central Tax (Rate). The second issue is concerning the applicable tax rate if the supply is not exempted.

The bench constituting of Hon’ble Members Shri Rajiv Agrawal and Shri Manoj Kumar Choubey held that the activities of holding Educational conference/ gathering of students, faculty and staff of other Schools are not exempt under relevant clauses of Entry 66/1/8 of the above-mentioned notification for the simple reason that the education conference does not fall under any of the categories so listed. Hence, GST shall be chargeable on the consideration received by the school from the participant school(s) for the participation of their students and staff in the impugned conference.

The Hon’ble Bench further stated that various services provided for organizing an educational conference/gathering of students and staff of other Schools, shall be liable to tax at the rate applicable to the respective services. For example, the catering services shall be liable to tax @ 5% without eligibility for Input Tax Credit.

Source: Taxscan

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