2020 (9) TMI 252 - AAR - GST

Permission for withdrawal of Advance Ruling Application - Levy of GST - Reverse Charge Mechanism - salary paid to Directors of the company who is paid salary as per employment contract - 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. HELD 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. The request to withdraw the application is considered.

Summary

Issues:
- Determination of liability to pay tax on goods or services
- Whether GST is payable under Reverse Charge Mechanism for salary paid to Directors as per employment contract

Analysis:
The Advance Ruling Authority addressed the issue raised by the applicant, a Private Limited Company engaged in manufacturing, regarding the GST liability on the salary paid to its Directors who also function as employees under an employment contract. The applicant sought clarification on whether GST is payable under Reverse Charge Mechanism (RCM) for such salary payments. The applicant referenced a ruling by the Authority of Advance Ruling in Karnataka, which concluded that remuneration to Directors is subject to tax under reverse charge basis. The applicant highlighted that the Directors are treated as employees, receiving regular salary and benefits, and their salaries are reported under "Income from Salary" in their personal tax returns. The applicant expressed doubt on the applicability of RCM to the salaries of Directors who are also employees. The applicant argued that the salary and benefits paid to Directors should not be taxable under the CGST Act, asserting that there is no liability to pay GST under RCM as per specific notifications.

The Authority considered the submission made by the applicant's authorized representative to withdraw the application. The authorized representative requested withdrawal of the application in a letter dated 29.06.2020. The Authority acknowledged and accepted the withdrawal request, thereby concluding the proceedings without further analysis or ruling on the GST liability issue raised by the applicant. The withdrawal of the application was duly noted, and the Authority did not provide any findings or conclusions on the matter following the withdrawal request.

In summary, the Advance Ruling Authority did not delve into the substantive issue of whether GST is payable under Reverse Charge Mechanism for the salary paid to Directors as per their employment contract. The application was withdrawn by the applicant before a ruling or decision was rendered by the Authority. The Authority accepted the withdrawal request, thereby concluding the proceedings without issuing any findings, analysis, or conclusion on the GST liability matter.