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No GST under RCM on Directors Remuneration – Facts & Arguments
1. Advance Ruling on M/s Clay Crafts India Pvt Ltd • M/s Clay Crafts India Private Limited (“The Applicant”) is engaged in manufacture of bone China Crockery, Transfer Sheet Decalcomania, other Utensils Item and Moulds & Die. • Applicant is having 6 directors in Board of Directors. • Directors are performing all duties and responsibility set out in law. Simultaneously, directors are also working at different levels of management as employees for which they are getting regular salaries and other allowances as per the policies.
2. Relevant Legal Extract of CGST law to determine RCM on Directors remuneration • “(2) Notwithstanding anything contained in sub-section • (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. Why Salaries / remuneration to Directors should not be charged to GST under RCM • Apart from being directors of the Board of Directors, Directors of petitioner are also working as whole time directors as an employee and treated as par with employees. • Petitioner is deducting EPF from their salaries and all other benefits are granted to them as given to other employees. • Directors working as whole time directors are de-facto employees of the company. • Therefore, as per Entry No. 1 to Schedule III of CGST Act, 2017, payment made to them for salary is not liable to GST under RCM.