Amount paid to Director

[Kaustubh Karandikar]

Amount paid by XYZ Pvt. Ltd. to Mr. PQR (Proprietor – ABC) towards Repairs & Service Charges and Labour Charges and ABC paid GST on it. Mr. PQR is also a director of XYZ Pvt. Ltd. Any GST implication to XYZ Pvt. Ltd. since PQR is director of XYZ Pvt. Ltd. and proprietor of ABC?

[Amit Agrawal]

There is no liability to pay GST under RCM on XYZ Pvt. Ltd., as subject services were NOT provided by Mr. PQR in his capacity as director of the Co.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

Transactions between XYZ and ABC to be at OMV since these are related persons.

Why has this query arisen?

[Shilpi Jain]

Also amount paid to PQR is as a proprietor of ABC. No liabiltiy under RCM

[GUNASEKARAN K]

My understanding & view as follows;

1. It is not remuneration paid by XYZ to Mr.PQR

2. ABC issued Tax Invoice for supply of Repair and Service to XYZ and paid the output liability, hence no other Tax impact i.e.RCM payable by XYZ.

3. The transaction between ABC and XYZ only not XYZ and Mr.PQR

[GUNASEKARAN K]

In continuation of my reply at serial No. 4 above, I wish to refer the relevant Circular for getting clarify on "Clarification in respect of levy of GST on Director’s remuneration"

'But this circular not relating to the transaction between ABC and XYZ'

Explanation: ABC & XYZ are different entities registered under GST which are liable to tax on their supplies falling under the definition of "Supply" under GST.

Circular No: 140/10/2020 - GST

[Padmanathan KV]

I agree with Experts,

XYZ Pvt and PQR are related persons. If ABC is entited to full ITC, then value declared in invoice shall be the Transaction Value. Other wise OMV has to be determined.

Regarding RCM liability, it is not in capacity as director and hence no RCM as covered by the recent circular on this.

AI Summary

XYZ Pvt. Ltd. not liable for GST under Reverse Charge Mechanism for services by director-proprietor Mr. PQR. XYZ Pvt. Ltd. paid Mr. PQR, a director and proprietor of ABC, for repairs and service charges, with GST paid by ABC. The main concern is whether XYZ Pvt. Ltd. has any GST liability under the Reverse Charge Mechanism (RCM) due to Mr. PQR's dual roles. Responses indicate no RCM liability for XYZ, as the services were provided by Mr. PQR as a proprietor, not as a director. Transactions between XYZ and ABC should be at Open Market Value (OMV) due to their related-party status, and the recent circular clarifies no RCM applies in this context.