Latest advance ruling and its Implication.  - PowerPoint Presentation

1.  Latest advance ruling and its Implication.  Vishwanath BhatCost AccountantTreasurer SIRC , I C A I9448357102`

2.  Latest advance ruling and its Implication .In re Clay Crafts India Pvt. Ltd. (GST AAR Rajasthan). (Consideration paid to the directors)In re M/s Alcon Consulting Engineers (India) Pvt. Ltd. (GST AAR Karnataka).Circular Regarding Clarification of Taxability of MD Remuneration. 140/10/2020 – GST.In re ID Fresh Food (India) Pvt. Ltd. (GST AAR Karnataka).

3. Notification No.13 /2017- Central Tax (Rate) dated 28.06.2017SI .No .Category of Supply of ServicesSupplier of ServicesRecipient of Services12346Services supplied by a Director of a company or a body corporate to the said company or the body corporateA director of a company or a body corporateThe company or a body Corporate located in taxable territory

4. In re Clay Crafts India Pvt. Ltd. (GST AAR Rajasthan). 20/02/2020.(Consideration paid to the directors)1 While going through the detailed submission by the applicant we observe that presently there are six Directors in the Company and all of them working at different level of management and each one of them is holding charge of procurement of raw material, production, quality checks, dispatch, accounting etc.2 We further observe that Consideration in form of salary and commission paid to the Directors by the company is against the services provided by them to the company and the company is recipient of such service and Directors are the supplier.3 The applicant is already paying GST by way of reverse charge mechanism on the commission paid to the Directors treating as such amount pertain to the service provided by them in the capacity of a Director.4 In the instant case question before us is whether the consideration paid to the Directors for providing services to the company is liable for GST under reverse charge mechanism vide Notification No. 13/2017- Central Tax (Rate) dated 28.06.2017.5 The term “consideration” in relation to the supply of goods or services or both is defined in clause (31) of Section 2 of CGST Act, 2017 as under-:

5. COMMENTS OF THE JURISDICTIONAL OFFICERThe jurisdictional officer (Assistant Commissioner, State Tax, Special Circle-II, Jaipur, Room No.322,2nd Floor, J-14, Zonal Kar Bhavan, Jhalana Institutional Area, JLN Marg Jaipur, Rajasthan 302004) has submitted his comments vide letter dated 03.01.2020 which can be summarized as under: –The salary paid to the Directors by the Company, 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 (salary) 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/RGST Act,2017 and the supplier of such service is the Director.-Notification No. 13 / 2017 – Central Tax (Rate) dated 28.06.2017 and Notification F.12(56)FD/Tax/2017-Pt.-1-51 dated 29.06.2017 stated that “on categories of supply of services mentioned in column (2) of the Table below, supplied by a person as specified in column (3) of the said Table, the whole of central tax leviable under section 9 of the said Central Goods and Services Tax Act, 2017 & Rajasthan Goods and service Tax Act, 2017 shall be paid on reverse charge basis by the recipient of the such services”. The notification is issued under Section 9(3) of the CGST Act, 2017. Entry 6

6. In re Clay Crafts India Pvt. Ltd. (GST AAR Rajasthan). 20/02/2020.(Consideration paid to the directors)Whether GST is payable under Reverse Charge Mechanism (RCM) the salary paid to Director of the company who is paid salary as per contract? The consideration paid to the Directors by the applicant company will attract GST under reverse charge mechanism as it is covered under entry No. 6 of Notification No. 13/2017 Central Tax (Rate) dated 28.06.2017 issued under Section 9(3) of the CGST Act, 2017.(b) Whether the situation would change from (a) above if the Director also is a part time Director in other company? Situation will remain same as (a) above and will attract GST under reverse charge mechanism.

7. In re M/s Alcon Consulting Engineers (India) Pvt. Ltd. (GST AAR Karnataka).Facts Of The Case. The applicant states that they are in the business of providing Consultancy services, like surface survey and map making, Project management consultancy services for construction projects, Engineering Advisory services and technical testing analysis services to the General Public, State Government Agencies, and Central Government throughout the country. The applicant states that while providing the above said services, some of the expenses are incurred by their employees on behalf of the Company, the details of which are as follows:i. Travelling Expensesii. Reimbursement of Transportation and Food Expensesiii. Vehicle Hire Chargesiv. Machinery Hire Chargesv. Boarding and Lodgingvi. Consumablesvii. Printing and Stationeryviii. Postal and Courier Chargesix. Mobile and Telephone Chargesx. Survey Materials, etc.

8. In re M/s Alcon Consulting Engineers (India) Pvt. Ltd. (GST AAR Karnataka).Sometimes the above said expenses were incurred by the employees is exceeding Rs.5,000-00 in a day and it is very difficult to monitor the same at regular intervals because their staff members are working at remote areas and there is no connectivity to reach or contact the office on a day to day basis or vice versa.The applicant also states that he would like to know whether tax under reverse charge mechanism is applicable on the remuneration paid to Directors.

9. In re M/s Alcon Consulting Engineers (India) Pvt. Ltd. (GST AAR Karnataka).FINDINGS & DISCUSSION.The facts presented by the applicant have 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 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 a 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.

10. In re M/s Alcon Consulting Engineers (India) Pvt. Ltd. (GST AAR Karnataka).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.

11. In re M/s Alcon Consulting Engineers (India) Pvt. Ltd. (GST AAR Karnataka).Whether the expenses incurred by the Staff members on behalf of the Company exceeding Rs.5000-00 a day and then reimbursed periodically are liable to tax.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.Whether RCM is applicable on remuneration paid to the Directors?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.

12. Circular Regarding Clarification of Taxability of MD Remuneration. 140/10/2020 – GST. Leviability of GST on remuneration paid by companies to the independent directors defined in terms of section 149(6) of the Companies Act, 2013 or those directors who are not the employees of the said company; and RCMleviability of GST on remuneration paid by companies to the whole-time directors including managing director who are employees of the said company.(192 NO RCM and No GST)194 J RCM

13. In re ID Fresh Food (India) Pvt. Ltd. (GST AAR Karnataka).Whether the preparation of Whole Wheat parota and Malabar parota be classified under Chapter heading 1905, attracting GST at the rate of 5%?.Applicant’s interpretation of Law:-The Applicant stated that the product Whole Wheat parota and Malabar (refined floor) parota is available in ambient and frozen form with a shelf life of minimum 3 days and maximum 7 days.The applicant contends that the product merits classification under Chapter heading 1905, under the product description of ‘Khakhra, plain chapatti or roti”.1905 - Bread, pastry, cakes, biscuits and other bakers’ wares, whether or not containing cocoa; communion wafers, empty cachets of a kind suitable for pharmaceutical use, sealing wafers, rice paper and similar products.

14. In re ID Fresh Food (India) Pvt. Ltd. (GST AAR Karnataka).FINDINGS & DISCUSSION:-The applicant is engaged in the preparation / manufacture and supply of the products whole wheat parota and Malabar (refined flour) parota, which are made up of whole wheat flour and refined flour (maida) respectively. The other common ingredients are RO purified water, edible vegetable oil or refined oil, edible common salt and edible vegetable fat. The products are not readily consumable (ready to eat), but need to be heated before consumption.The applicant contends that their products merit classification under heading 1905, whose description akin to “Khakhra, plain chapatti or roti” and therefore are taxable at 5% GST, in terms of entry No.99A of Schedule I to the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended vide Notification No.34/2017-Central Tax (Rate) dated 13.10.2017.In view of the above the question before this authority to decide is whether the impugned products are classifiable under heading 1905 or not. We proceed to examine, discuss 8s decide the right classification of the impugned products. In this regard we draw reference to the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017.

15. In re ID Fresh Food (India) Pvt. Ltd. (GST AAR Karnataka).Notification No.34/2017-Central Tax (Rate) dated 13.10.2017, which specifies the applicable rate of GST as 5%, in respect of the goods covered under heading 1905 or 2106 and having description as “Khakhra, plain chapatti or roti”.As for as the second condition is concerned the impugned products are described as “parota” and hence are neither khakhra, plain chaptatti nor roti. Further the products khakhra, plain chaptatti or roti are completely cooked preparations, do not require any processing for human consumption and hence are ready to eat foods preparations, whereas the impugned products are not only different from the said khakhra, plain chaptatti or roti but also are not like products in common parlance as well as in respect of the essential nature of the product. These products also require further processing for human consumption, as admitted by the applicant.Thus the benefit of entry No.99A of Schedule I to the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended vide Notification No.34/2017-Central Tax (Rate) dated 13.10.2017 is not applicable to the instant case and the applicant is not entitled for the same.

16. In re ID Fresh Food (India) Pvt. Ltd. (GST AAR Karnataka).Ruling The product ‘parota’ is classified under Chapter Heading 2106 and is not covered entry No. 99A of Schedule I to the NNotification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended vide Notification No.34/2017-Central Tax (Rate) dated 13.10.2017.

17. Thank You