2023 (10) TMI 409 - HC - GST

Company Director's Services to Own Company Trigger GST Reverse Charge Mechanism Under Specific Provisions

HC ruled that services provided by a company director to their own company are subject to GST on a reverse charge basis. The petitioner's challenge ... Payment of GST under Reverse Charge Mechanism (RCM) - guarantee/security to the bank provided by the Managing Director by providing the personal properties as security and personal guarantee - N/N. 13/2017- Central Tax (Rate) dated 28.06.2017 - HELD THAT:- A plain reading of the notification referred to in the preceding paragraphs would clearly give an indication that the Central Government vide the said notification had specifically notified that the services provided by the Director of a company or a body corporate to the said company or said body corporate be leviable of tax on reverse charge basis and in the said event, the company would become liable to pay the tax for the said services. The said notification is also not under challenge and the same still holds good. In the teeth of the said notification, the finding arrived at by the respondent No. 1 at the first instance dated 18.11.2021 and the order in original dated 31.03.2023 passed by the respondent No. 3 also cannot be said to be in any manner erroneous, arbitrary or bad in law - No strong case made out by the petitioner calling for interference with the said impugned order. Petition dismissed. Issues:The issue involved in this case is the liability to pay Goods and Services Tax (GST) on the guarantee/security provided to a bank by the Managing Director using personal properties as security and personal guarantee.Summary:The petitioner filed a writ petition challenging the order passed by the Additional Commissioner and the Superintendent of Central Tax, affirming the rejection of the petitioner's contention regarding the non-requirement to pay GST on the guarantee/security provided by the Managing Director. The respondent Department produced Notification No. 13/2017-Central Tax (Rate) during the hearing, which specified that services supplied by a director of a company or body corporate to the same company or body corporate are subject to tax on a reverse charge basis. The petitioner sought exemption from GST based on the personal properties provided as security and personal guarantee by the Managing Director.The court noted that the notification clearly stated that services provided by a director to the company are subject to tax on a reverse charge basis, making the company liable to pay the tax for such services. The court found that the orders passed by the authorities rejecting the petitioner's claim were not erroneous, arbitrary, or illegal in light of the notification. The court did not find sufficient grounds for interference with the impugned order, leading to the dismissal of the writ petition without any costs. Any pending miscellaneous petitions were also ordered to be closed as a result of this judgment.