GST on reimbursements, Goods and Services Tax - GST

[Madhavan iyengar]

Company A based in india it has 2 directors 1 director has purchased some services and software from foreign vendor who raised invoice on director

subsequently director presented the bills to company A and got reimbursements

whether these reimbursements paid by Company A to its directors will attract RCM

Posts / Replies

[Ganeshan Kalyani]

RCM is not applicable.

[Rajagopalan Ranganathan]

Sir,

Only when the director supply some service to the company gst is payable under RCM by the company vide Sl. No. 6 of Notification No. 13/2017-C.T. (Rate) dated 28.6.2017 as amended.

[MUKUND THAKKAR]

Transaction cover under import of services and need to Pay RCM.

[KASTURI SETHI]

I agree with Sh.Mukund Thakkar, Sir. In this case, tax must have been paid by the company on import of service under RCM.

I think the querist is asking about leviability of GST only on 'reimbursement'. Every type of reimbursement is not taxable.In this situation, reimbursement does not involve the element of 'supply'. Hence it cannot be treated as consideration.

[Alkesh Jani]

Sir,

In this regards, I think that first it should be ascertain that whether Director is employee of the Company (drawing salary) or he is providing service of Directorship.?

Thanks,

With due regards.

[Ganeshan Kalyani]

I agree with Alkesh Ji. If the Director is an employee of the company then reimbursement claimed by him will not be subject to GST. That is GST is not payable by the company. No doubt on the very first transaction of import by the Director the import duty must have been paid by him.

Secondly, if the Director is not the employee of the company then the company will have to pay GST under RCM on reimbursement part.

[Ganeshan Kalyani]

If the company purchase from foreign vendor then GST is payable under RCM as import of service.

[KASTURI SETHI]

Dear Experts

If we penetrate into Sh. Madhavan Iyengar's queries and replies posted by him so far, we can infer that his interpretation and understanding of GST laws is very far-sighted. He is very very well conversant. He knows if the director is not employee, what will be repercussions. Sh. Iyengar gathers additional knowledge (third opinion) which is his right offered by TMI. His queries are very deep and these open closed doors of mind. His queries force us to ponder over the issue in depth.

This expression has neither exaggeration nor false praise

[Madhavan iyengar]

Kasturi sir

thanks for your kind words and appreciation and giving prompt clarifications on any query raised and giving the fitting response as a result of which we are also forced (in the right sense) to put forward our thoughts on issues which we come across

through this medium we are all able to express our views and get clarifications from all experts as the gst law is new and it has very wide ramifications and interpretation of the law from various angles is very crucial so that we are able to defend the views at various forums including courts with adequate facts and analysis and in the process will also help in enhancing our perspective.

[KASTURI SETHI]

Yes, Sir. Of course, we reinforce each other by sharing knowledge.

[Alkesh Jani]

Sir,

Please also elaborate, what is contract and payment terms as per Memorandum/ resolution passed. whether, the said services and software were in nature of personal use or for Business is also to be ascertain.

Further, as the director has purchased and paid for the services and software, the transaction may have attained finality. Now when director is presenting the bill to the company, what is the nexus of the services availed and how it is used for business or furtherance of business important aspect.

In GST we need to understand the supply and transaction with respect to goods and services, so a close look is required in the matter.

Thanks,

With Regards

[Ganeshan Kalyani]

Healthy discussion enriches the knowledge of the readers.