TaxTMI 
TaxTMI 
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?
Amount paid to Director
03 Aug 2023 
6 Replies 
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Reverse charge on supplies: no RCM where services are by proprietor not acting as company director; related party OMV may apply.
Payments to a proprietor firm owned by a company director for repair and service work are supplies between distinct taxable persons; reverse charge does not apply where services are supplied by the proprietor entity and not by the individual in his capacity as director. For related parties, transaction value should reflect open market value unless the supplier has full input tax credit, in which case the invoiced value is the transaction value. A circular on director remuneration does not alter this position for inter entity supplies. (AI Summary)
Payments to a proprietor firm owned by a company director for repair and service work are supplies between distinct taxable persons; reverse charge does not apply where services are supplied by the proprietor entity and not by the individual in his capacity as director. For related parties, transaction value should reflect open market value unless the supplier has full input tax credit, in which case the invoiced value is the transaction value. A circular on director remuneration does not alter this position for inter entity supplies. (AI Summary)