Note: Under Section 100 of the CGST/ RGST Act, 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/ RGST Act, 2017, within a period of 30 days from the date of service of this order.

• At the outset, we would like to make it clear that the provisions of both the CGST Act and the RGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the RGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / RGST Act would be mentioned as being under the “GST Act”.

•  The issue raised by M/s Man Structurals Pvt. Ltd. Near Railway Loco, Jaipur, Rajasthan (hereinafter the applicant) to pronounce advance ruling under the ambit of the Section 97(2) (e) given as under: –

c. Determination of the liability to pay tax on any goods or services or both;

• Further, the applicant being a registered person (GSTIN 08AAECM0053A1Z5), as per the declaration given by him in Form ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority.

A. SUBMISSION AND INTERPRETATION OF THE APPLICANT:

1. The applicant is a Private Limited Company incorporated under the Companies Act, 1956 having Certificate of Incorporation No. U27107RJ197OPTC001305 of 1970 and is having GST Registration No. 08AAECM0053A1Z5. The applicant isengaged in the manufacturing of Galvanized Transmission Line Tower parts falling under Chapter Heading No. 73 of the First Schedule to the Tariff;

2. The applicant’s Board of Directors, at present consists of three (3) directors namely: Shri Kishore Rungta, Shri Gaura Rungta and Shri Niraj Rungta. The applicant has submitted that all the above-mentioned Directors are performing all the duties and responsibilities as required under the Company laws. However along with that these Directors are also working in the company at different level of management and each one of them is holding charge of procurement of raw material, production, quality checks, dispatch, accounting etc. In other words, they are also working as an employee of the company for which they are being compensated by the company by way of regular salary and other allowances as per the company policy and as per their employment contract. In fact, these Directors are treated at par with any other employee of the company as far as their employment is concerned. The company is deducting TDS on their salary and PF laws are also applicable to their service. Therefore, in all practical purposes these directors are the employees of the company and are working as such besides being Directors of the Company.

3. It is submitted that recently certain facts events have taken place which have made the applicant to reconsider the situation afresh; that the first one which has come to the knowledge of the applicant is the decision by the Hon’ble Authority of Advance Ruling, Karnataka (Bengaluru) given in the case of M/s. Alcon Consulting Engineers (India) Pvt. Ltd. Bangluru (AR No. KAR ADRG 83/2019) dated 25.09.2019. In this ruling the Hon’ble Authority of Advance Ruling has in para 5 ruled as under:

5. Regarding the remuneration to the Directors paid by the applicant, the services provided by the Directors to the Company are not covered under clause (1) of the Schedule III to the Central Goods and Services Tax Act, 2017 as the Director is not the employee of the Company. The consideration paid to the Director is in relation to the services provided by the Director to the Company and the recipient of such service is the Company as per clause (93) of section 2 of the CGST Act and the supplier of such service is the Director.

5.1 The question before us is not whether this service is taxable or not, but whether this supply of services is liable to tax under reverse charge mechanism.

5.2 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 said Table, the whole of central tax leviable under section 9 of the said Central Goods and Services Tax Act, shall be paid on reverse charge basis by the recipient of the such services”.

In the present case, the applicant is the company and is located in the taxable territory and the Directors’ remuneration is paid for the services supplied by the Director to the applicant company and hence the same is liable to tax under reverse charge basis under section 9 (3) of the Central Goods and Services Tax Act, 2017.

4. Based on the above decision the Authority for Advance Ruling, Jaipur also have given similar decision in the case of M/s. Clay Craft India (P) Ltd.

5. That therefore, going by the above decision one interpretation emerges that the work done by our directors as an employee would also be covered and their services would be leviable to GST under clause (93) of section 2 of CGST Act 2017. However, the Hon Authority of Advance Ruling has not differentiated nor it has dealt with the possibility of a person being director of the company and simultaneously working as a director/employee also.

6. That the applicant is already paying GST under reverse charge mechanism on the on any commission paid to Director as such amount pertain to the service provided by them in the capacity of a Director.

7. That the applicant has further submitted that the salary being paid to our Directors is being booked under “Income from Salary” by the Directors in their personal Income Tax returns.

8. That in such circumstances a doubt has arisen about applicability of Reverse Charge Mechanism on the salary paid to the Directors of our company who are also working as Directors as employee and having been treated as an employee at par with other employees.

9. That thus finally we are of the opinion that the salary and other benefits paid to our directors and Director is not taxable under C.G.S.T. Act, 2017 and consequently there is no liability cast upon the applicant to pay GST under reverse charge mechanism as envisaged under entry no.  6 of Notification No. 13/2017- Central Tax (Rate) dated 28th June 2017 86 entry no. 7 of Notification No. 10/2017- Integrated Tax (Rate) dated 28th June 2017.

B. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT

Whether GST is payable under Reverse Charge Mechanism (RCM) the salary paid to Directors of the company who is paid salary as per employment contract?

C. WITHDRAWAL OF APPLICATION

On behalf of the applicant Shri Madhu Sudan Sharma, authorized signatory of the applicant, submitted a letter dated 29.06.2020 addressed to this authority requesting to withdraw their application.

D. FINDINGS, ANALYSIS & CONCLUSION:

We observe that Shri Madhu Sudan Sharma, authorized representative of the applicant, submitted a letter dated 29.06.2020 addressed to this authority requesting to withdraw their application.

Accordingly, their request to withdraw the application is considered.