TaxTMI 
TaxTMI 
2022 (12) TMI 359
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....rvices Tax Act, 2017 (hereinafter referred to as the CGST Act and KGST/SGST Act respectively). The Applicant is an integrated Custom Research and Manufacturing Services (CRAMS) provider offering single point access to discovery services, CPRD (Chemical Process Research and Development), drug production development & regulatory support services and also pharmaceutical technologies to global pharma and Biotech Companies. 3. The applicant has sought advance ruling in respect of the following questions: i. Whether on reimbursement of expenses at actual cost which are incurred by the employee staffs on behalf of Company is liable to tax? ii. Whether Reverse Charge Mechanism is applicable on reimbursement of expenses paid on behalf of the Company at actuals which are incurred by the employee staff who is also a whole-time director Company? iii. Whether- a. time limit prescribed to take input tax credit under the Section 16(4) of the GST Act, 2017 applies only for the invoice or debit note for the supply of goods or services or both or it shall also applies to invoice issued in accordance with the provisions of clause of sub-section (3) of Section 31....
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.... vii. Mobile and Telephone Charges etc The applicant states that employee staff takes all the invoices in the name of the Company along with the Company GSTIN for domestic transaction invoices and company takes input tax credit in respect of eligible transactions. In respect of transactions which attracts reverse charge such as payments to; i. Goods Transport Agencies, ii. Lawyers / advocates iii. Import of services etc., The applicant states that the Company discharges the liability by paying under reverse charge mechanism to government in the cases cited above. Employees incur expenses on behalf of the company in the course of employment and the said amounts are reimbursed by the company on periodical basis. These expenses are incurred by the company and are only paid by the employee and later reimbursed to the employee by the company. 5.3 This office had addressed a letter to the Assistant Commissioner of Commercial Taxes, LGSTO-190, Mysuru on 28-04-2022 to file comments on the application filed. In response to this, the ACCT has furnished comments as below: "1. Whether on reimbursement of expenses at actual cost which are inc....
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....hedule 1, made or agreed to be made without a consideration; 2. Notwithstanding anything contained in sub-section (1),- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. 3. Subject to the provisions of sub-sections (1) and (2), the Government may on the recommendations of the Council, specify, by notification, the transactions that are to be treated as - (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. In view of the said provision, as per my knowledge this service is taxable under KGST ACT 2017. 2. Whether Reverse Charge Mechanism is applicable on reimbursement of expenses paid on behalf of the company at actual which are incurred by the employee staff who is also a whole-time director of the Company? From the informatio....
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....penses paid" as informed by the applicant, if it is coming under the definition of "Salary" then it is not a taxable service and if it is coming under "other than the Salary" then as per circular No I3/2017- Central Tax (Rate) dated 28.06.2017, the company is liable to discharge the applicable GST on it on reverse charge basis. 3. Whether a. Time limit prescribed to take input tax credit under the section 16(4) of the GST Act, 2017 applies only for the invoice or debit note for the supply of goods or service or both or it shall also applies to invoice issued in accordance with the provisions of clause (f) of sub section (3) of Section 31 i.e self invoices by registered person who is liable to pay tax under sub section (3) or sub section (4) of section 9 (under reverse charge mechanism) b. Tax paid during current financial year under reverse charge mechanism as per sub section (3) or sub section (4) of section 9 of any of the previous financial year transaction, input tax credit on such payment of tax would be availed in the year of payment or in the year in which transaction happened For the above point, as per my knowledge, Time of supply of ser....
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....he inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government. Provided that a deposit given in respect of the supply of goods or services, or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply. The amount paid by the employee to the supplier of service is covered under the term "consideration" as if it is paid by the company itself for the services received by them on behalf of the company. This amount reimbursed by the company to the employee later 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. 6.2 The applicant with reference to question (ii) is of the view that Notification No. 13/2017 Central Tax (Rate) dated 28.06.2017 states 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 sa....
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....have been an employee or proprietor or a partner of the said company, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed in the said company. 4.2 Therefore, in respect of such directors who are not the employees of the said company, the services provided by them to the Company, in lieu of remuneration as the consideration for the said services, are clearly outside the scope of schedule III of the CGST Act and are therefore taxable. In terms of entry at SL No. 6 of the Table annexed to notification No. 13/2017 - Central Tax (Rate) dated 28.06.2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis. 4.3 Accordingly, it is hereby clarified that the remuneration paid to such independent directors, or those directors, by whatever name called who are not employees of the said company, is taxable in hands of the company, on reverse charge basis. Leviability of GST on remuneration paid by companies to the directors, who are also an employee of the said company 5.1 Once, it has been ascertained whether a director, ir....
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....act of service") and reverse charge is not applicable on said transaction. 6.3 The appellant with reference to question iii (a) is of the view that - Section 16(4) (4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier: Section 16(2). (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless, - (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed. Such additional documents are prescribed under Rule 36 RULE 36. Documentary requirements and conditions for claiming input tax credit.- (1) The input tax credit shall be availed by a registered perso....
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....ccountant and Duly Authorised Representative appeared for personal hearing proceedings held on 22-06-2022 and reiterated the facts narrated in their application. FINDINGS & DISCUSSION 8. At the outset we would like to make it clear that the provisions of the CGST Act, 2017 and the KGST Act, 2017 are in pari-materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the KGST Act. 9. We have considered the submissions made by the applicant in their application for advance ruling. We have also considered the issues involved on which advance ruling is sought by the applicant and the relevant facts along with the arguments made by their authorized representative and also their submissions made during the time of hearing. 10. The Applicant is an integrated Custom Research and Manufacturing Services (CRAMS) provider offering single point access to discovery services, CPRD (Chemical Process Research and Development), drug production development & reg....
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....all not include any subsidy given by the Central Government or a State Government; (b) The monetary value of any act or forbearance, in respect of in response to, or for the inducement of the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply," 12.3 The amount paid by the employee to the supplier of service represents the amount paid 'by any other person' and is therefore covered under the term "consideration" paid by the applicant to the service provider for the services received by the employees 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 in terms of clause 1 of the Schedule III of the CGST Act,....
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.... 5.3. Accordingly, it is clarified that the part of Director's remuneration which are declared as "Salaries" in the books of a company and subjected to TDS under Section 192 of the IT Act, are not taxable being consideration for services by an employee to the employer in the course of or in relation to his employment in terms of Schedule III of the CGST Act, 2017. 5.4 It is further clarified that the part of employee Director's remuneration which is declared separately other than "salaries" in the Company's accounts and subjected to TDS under Section 294J of the IT Act as Fees for professional or Technical Services shall be treated as consideration for providing services which are outside the scope of Schedule III of the CGST Act, and is therefore, taxable. Further, in terms of notification No. 13/2017-Central Tax (Rate) dated 28.06.2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis. 13.2 A director who has taken an employment in the company may be functioning in dual capacities, namely, one as a director of the company and the other on the basis of the contractual relationship of m....