Page 12 - Banking Finance June 2020

GST UPDATE

GST

NEWS
NEWS
NEWS
NEWS
NEWS

No GST on directors' salary Sunil Gabhawalla, chartered accoun- Karnataka's Authority for Advance Rul-
tant and GST expert, told TOI, "Sched- ing for GST for an 18% levy applied to
The controversy on whether remunera-
tion paid to directors of a company is ule III clearly excludes services by an frozen, packed and preserved wheat
employee from the purview of the GST. parotas and malabar parotas, with a
subject to the goods and services
tax(GST) has been put to rest by a re- A long time ago, the Supreme Court shelf life of three to seven days, and did
cent decision of the Authority for Ad- has laid down the test of what consti- not apply to plain rotis.
tutes an employer-employee relation-
vance Rulings (AAR), Karnataka bench. "It may be noted that frozen parota is
ship. It is heartening to see that this preserved, sealed packed, branded and
Anil Kumar Agrawal, who had received advance ruling respects this test."
salary as a director from a private is usually sold at higher prices. It is not
company, had approached the bench. While the AAR-Karnataka bench ex- a staple itemand is consumed by the
plained the grounds on which GST will class which could afford to pay taxes.
In its order dated May 4, the AAR
bench has clarified that if the director apply in respect of director's remu- Even items like cheaper biscuits, past-
is an employee of the company, there neration, owing to lack of documen- ries, cakes, etc, attract GST at the rate
tary evidence submitted by the appli- of 18%. Frozen food would be more
will be no incidence of GST. However,
cant, it was non-committal as regards comparable to such item. Frozen foods
if the director is a non-executive direc-
tor (that is, a nominated director), and the specifics of Agrawal's case. can not be comparable to plain roti or
provides his or her services to the com- The applicant has not furnished docu- plain parota served in restaurants or
pany, then the remuneration paid is ments such as the agreement between taken as staple food, or eaten by poor
subject to GST. In such cases, the 're- him and the private company, his ap- on a day-to-day basis," it said.
verse-charge' mechanism will apply pointment order, details of provident
and it is the company (recipient of the fund deductions, etc, which would help Goods purchased, sold
services) who will pay the GST. decide whether he is in receipt of sal- overseas will attract GST
ary as an employee or as an indepen-
AAR rulings have a persuasive role in in India: AAR
similar cases. Thus, this ruling will be dent director, said the AAR. However,
useful to India Inc to substantiate that it went on to add that if the salary was A domestic company buying goods
GST does not arise in case of remu- received by the director in his capac- from abroad and selling to another
neration paid to full-time directors, ity as an employee, it would be outside country will have to pay GST on such
who essentially are key managerial the scope of GST. transactions even if the said products
personnel of the company. The ruling are not entering the Indian territory,
obtains additional significance as, a 18% GST only on frozen the Authority for advance ruling (AAR)

month ago, the Rajasthan AAR had parotas has said.
held to the contrary and opened a On an application filed by Sterlite Tech-
The government said that the ruling by
pandora's box. nologies, the Gujarat-Bench of AAR has

12 | 2020 | JUNE | BANKING FINANCE