Page 97 - GSTL_30th April 2020_Vol 35_Part 5

2020 ] IN RE : CLAY CRAFT INDIA PVT. LTD. 583
1.12 that this comes after the tax department started raising queries on
how companies have dealt with this issue. ET had first written on November 14
that some of the top companies headquartered in Pune, Mumbai and New Delhi
have started receiving queries from the tax department on cross-charging of CEO
and CEO salaries;
1.13 that according to a person close to the development the Central
Board of Excise and Customs (CBEC), is set to clarify that common function like
Human Resources should be out of the GST gamut.
“The intention of the GST law was never to tax salary and any other inter-
pretation should be avoided as this would lead to prolonged litigation. Sal-
ary cannot be under the GST net and there is an urgent need for a clarifica-
tion around this,” said Rohit Jain, partner, ELP, a law firm;
1.14 The tax department has started questioning top companies and
banks if they were passing on some of the common costs like salaries of chief ex-
ecutives to their branch offices. The department wants companies to proportion-
ately distribute common costs from head office to branch offices and treat this as
a supply. Once this is treated as a supply, 10% of it has to be added to the cost
and 18% GST could be levied on the total amount;
1.15 The applicant submits that our directors along with being director
of the Board of Director of the company are also working as whole time Director
in the company as an employee and are being treated at par with any other em-
ployee of the company;
1.16 that the company is deducting the EPF from their salaries and all
other policies and benefits to them are given as per the policy decided by the
company for their employees;
1.17 that in the light of the treatment of Directors the applicant is of the
view that the Directors who are working as whole time directors are de facto em-
ployees of the company and thus the payments made to them as salary+ benefits
are not liable to GST and consequently the company is not liable to pay any GST
on such payments by way of Reverse Charged Mechanism. Such being our bona
fide belief we submit our understanding as follows :
1.18 The applicant submits that Section 7 of the GST Act, 2017 states as
under :
7.(1) For the purposes of this Act, the expression “supply” includes -
(a) all forms of supply of goods or services or both such as sale,
transfer, barter, exchange, licence, rental, lease or disposal
made or agreed to be made for a consideration by a person in
the course or furtherance of business;
(b) import of services for a consideration whether or not in the
course or furtherance of business;
(c) the activities specified in Schedule I, made or agreed to be
made without a consideration; and
(d) the activities to be treated as supply of goods or supply of ser-
vices as referred to in Schedule II.
(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 Gov-
ernment, a State Government or any local authority in which
GST LAW TIMES  30th April 2020  97