Page 21 - GSTL_16th July 2020_Vol. 38_Part 3

A DIRECTOR AND HIS GST LIABILITY
By
V. Srikanth
ADVOCATE

Top managers worry whether the services pro-
vided by a director of a company or a body corporate to
the company or the body corporate can be subjected to tax
under the CGST Act and, if so, whether the tax is payable
by the company or body corporate on reverse charge ba-
sis as per the Notification No. 13/2017, dated 28-6-2017
issued by the Government of India. This article explores this issue.
Clause (1) of Schedule-III to the CGST Act provides that the services by
an employee to the employer in the course of or in relation to his employment
shall be treated as activities or transactions which are neither a supply of goods
nor a supply of services. The consequence of an activity specified in the Sched-
ule-III is that the activity is not taxable under the Act.
The question that arises for consideration is whether the director of a
company can be regarded as an employee of the company notwithstanding the
notification issued by the Government of India directing the recipient of the ser-
vices to pay tax on reverse charge basis. If the director of a company can be re-
garded as an employee of the company then it follows that tax cannot be levied
under the Act since the activity falls under clause (1) of Schedule-III to the CGST
Act.
Recently, in 2020 (35) G.S.T.L. 580 (A.A.R. - GST - Raj.) (In Re : Clay Craft
India Private Limited, Rajasthan), the Advance Ruling Authority at Rajasthan, had
taken the view that as per Notification No. 13/2017, dated 28-6-2017, the consid-
eration paid to the directors of the company shall be subject to tax on reverse
charge basis. The advance ruling authority simply held the directors were not
employees of the company. The advance ruling authority at Karnataka, in 2019
(30) G.S.T.L. 678 (AAR - GST), (In Re : Alcon Consulting Engineers (I) Private Lim-
ited), had taken an identical view, relying on the aforesaid notification.
The above advance ruling authorities had not referred to an earlier deci-
GST LAW TIMES  16th July 2020  21