SERVICES PROVIDED BY DIRECTOR OF COMPANY TO COMPANY IS UNDER REVERSE CHARGE OR NOT

[GIRISH LOKHANDE]

WE ARE RECEIVING SERVICE OF COMMERCIAL PROPERTY RENTED BY DIRECTOR OF COMPANY. REVERSE CHARGE NOTIFICATION NO. 13/2017 DT. 28-6-17 SL NO. 6 SAYS

(2) Category of Supply of Services :Services by the Director: Services supplied by a director of a company to the said company

(3) Supplier of Service :A director of a company

(4) Recipient of service :A company located in the taxable territory.

I JUST REMOVED BODY CORPORATE WORD FROM ABOVE & FOUND THAT SERVICES BY DIRECTOR IS UNDER REVERSE CHARGE & RECIPIENT OF SERVICE IS COMPANY

NATURE OF SERVICE NOT SHOWN MEANS ANY SERVICE GIVEN BY DIRECTOR TO THE COMPANY WHICH INCLUDES RANT OF COMMERCIAL PROPERTY FOR COMPANY USE

I READ SOME COMUNNICATION THAT RENT IS NEVER UNDER REVERSE CHARGE IT IS ALWAYS IN FORWARD CHARGE & DIRECTOR IS TO PAY TAX IF HIS TURNOVER IS MORE THEN 20 LACS.

IN MY OPENION IF RENTING OF IMMOVABLE PROPERTY BY DIRECTOR, THEN ONLY IT IS UNDER REVERSE CHARGE. IF RENTING ERVICE GIVEN BY ANY OTHER PERSON THEN GST IS PAYABLE IF HE IS ELIGIBLE TO PAY.

EXPERT OPINION IS REQUIRED.

REGARDS

[KASTURI SETHI]

Whether Director is providing renting service in his personal capacity or as Director (on behalf of the Company) to your company ? Pl. Confirm.

[Mahir S]

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 section 2(93) of the CGST Act and the supplier of such service is the Director.

Hence, the company is liable for the payment of GST under RCM.

Better to pay n avoid litigation on the issue.

[GIRISH LOKHANDE]

Director has ranted commercial space of his ownership to Company, where he is working director. means director given rent on personal capacity.

Here dispute is that whether rent of accommodation is service or not, as per notification 11/2017 Central Tax (rate) under chapter sub heading 9963 SL NO. 7, PARA IX - ACCOMMODATION, FOOD AND BEVERAGE SERVICE OTHER THEN (I) TO (VIII). TAX RATE SLAB IS 9% CGST

[KASTURI SETHI]

Dear Querist,

The following Board's letter pertains to Service Tax era but in my view it is applicable even now in GST regime inasmuch as the language of Director's service under RCM remains the same. So it will be very helpful to you in arriving at correct and concrete decision.

The C.B.E. & C. vide Letter No. F. No 354/127/2012-TRU, dated 27-7-2012 in para 7 clarified as follows in this regard :

"Services of a director on the board of a company have now become taxable.  A director may be appointed either in an individual capacity or to represent an entity (including government) who has either invested in the company or is otherwise authorized to nominate a director. When a director receives payment in his personal capacity, the same is liable to be taxed in the hands of the director. However, where the fee is charged by the entity appointing the director and is paid to such entity, the services shall be deemed to be supplied by such an entity and not by the individual director. Thus in the case of Govt. nominees, the services shall be deemed to be provided by the Govt. and liable to be taxed under the exclusion sub- (iv) of clause (a) of section 66D of the Finance Act, 1994 i.e. support services by Government to business. Such services are liable to be taxed on reverse charge basis."

[GIRISH LOKHANDE]

DEAR ALL,

THANKS FOR YOUR VALUABLE SUGGESTION ON THE SUBJECT ABOVE, STILL THERE IS A GAP TO ARRIVE CONCLUSION. AS NOTHING IS SUPPORTED BY CURRENT LAW BY ANY DOCUMENTS.

GRAY AREA ON THE ISSUE.

WHETHER RENT OF COMMERCIAL PROPERTY IS A SERVICE OR NOT. AS DIRECTOR IS EARNING MONEY FROM HIS PAST INVESTMENT, THE USER OF PROPERTY IS PAYING ALL DUES LIKE WATER,ELECTRICITY & MAINTENANCE CHARGES & GIVING APPLICABLE TAX ON IT.

DIRECTOR IS NOT PUTTING ANY EFFORT/TECHNICAL ADVISE TO COMPLETE THIS ACTIVITY, HE IS SIMPLY RECEIVING PAYMENT ON DUE DATE BY CHEQUE & WHICH IS INCLUDED IN HIS INCOME TAX LIABILITY.

THE DIRECTOR (OWNER OF COMMERCIAL PROPERTY) IS ALSO PAYING PROPERTY TAX/ INCOME TAX AS PER HIS SLAB. SINCE HIS ANNUAL INCOME FROM RANTE IS LESS THEN 20 LACS, HENCE HE IS NOT CHARGING GST ON RANT.

FROM GOVERNMENT POINT OF VIEW THIS ACTIVITY IS NOT GENERATING ANY TAX, AS EVERY COMPANY IS CLAIMING OF ITC FOR THE GST PAID UNDER REVERSE CHARGE.

SITUATION ARISE DUE TO THE INCOMPLETE LAW

IF I PAY THE THE GST ON REVERSE CHARGE BASIS, IF IT IS NOT REQUIRED THEN , I WILL NOT BE ABLE TO CLAIM GST.

IF I AM NOT PAYING WHICH IS REQUIRED BY LAW THEN I HAVE TO PAY THE INTEREST & PENALTY ON WHICH I CAN NOT CLAIM ITC.

STILL REQUIRE YOUR VALUABLE GUIDANCE ON THE ISSUE.

THANKS

GIRISH / 9039811571

AI Summary

Debate on GST Reverse Charge Mechanism: Is Commercial Property Rent by Company Directors a Service Under RCM? A discussion on whether services provided by a company director, specifically renting commercial property to the company, fall under the reverse charge mechanism (RCM) for GST. The main contention is whether such rent is considered a service under RCM. Some argue that if the director rents in a personal capacity, it is not under RCM, while others suggest paying GST under RCM to avoid litigation. The issue remains unresolved, with concerns about the lack of clear legal guidance and potential tax implications for both the director and the company.