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TMI Blog2020 (4) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... issue raised by M/s. Clay Craft India Pvt. Ltd., F-766A, F-766, Road No. ID, VKI Area, Jaipur, Rajasthan 302013 (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97 (2) (e) given as under: - (e) Determination of the liability to pay tax on any goods or services or both; * Further, the applicant being a registered person (GSTIN is 08AAACC6866D1ZO as per the declaration given by him in Form ARA01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the applicant is admitted to pronounce advance ruling. 1. SUBMISSION AND INTERPRETATION OF THE APPLICANT: 1.1 The applicant is engaged in the manufacture of bone China Crockery, Transfer Sheet Decalcomania, other Utensils Item and Moulds & Die falling under chapter heading No. 69111011, 49081000, 84801000 & 84801000 of the Tariff. He is registered with Goods & Service Tax department and are having GST registration No. 08AAACC6866D1ZO. He is availing Input credit on inputs as well as input services used in or in relation to manufacture of our final product as per the provisions of GST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service is the Director. 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. 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". The notification is issued under Section 9(3) of the CGST Act, 2017. Entry 6 of the said Notification reads as under- Sl.No. Category of Supply of Services Supplier of Services Recipient Services of Services 1 2 3 4 6 Services supplied by a Director of a company or a body corporate to the said company or the body corporate A director of a company or a body corporate The company or a body corporate located in the taxable territory 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of the GST gamut. "The intention of the GST law was never to tax salary and any other interpretation should be avoided as this would lead to prolonged litigation. Salary cannot be under the GST net and there is an urgent need for a clarification around this, "said Rohit Jain, partner, ELP, a la w firm; 1.14 The tax department has started questioning top companies and banks if they were passing on some of the common costs like salaries of chief executives to their branch offices. The department wants companies to proportionately distribute common costs from head office to branch offices and treat this as a supply. Once this is treated as a supply, 10% of it has to be added to the cost and 18% GST could be levied on the total amount; 1.15 The applicant submits that our directors along with being director of the Board of Director of the company are also working as whole time Director in the company as an employee and are being treated at par with any other employee of the company; 1.16 that the company is deducting the EPF from their salaries and all other policies and benefits to them are given as per the policy decided by the company for their employees; 1.17 that in the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e term "employee" has not been defined under either C.G.S.T. Act, 2017 or SGST Act, 2017. Therefore, to understand as to who is an employee we would have seek understanding from other sources; 8 As per Cambridge Dictionary an employee is: "someone who is paid to work for someone else" In the case of applicant, the director is an individual (someone) who is working for the company (someone else) thus from this point of view our directors are nothing but an employee as long as they are working as an individual in the company; 1.22 that further we would like to submit the definition of employee under various Indian laws which would guide us to make our submissions clear for kind consideration of Hon'ble Authority of Advance Ruling; 1.23 that section 2(94) of the companies Act reads as under: Section 2(94) "director" includes a director in the employment of the company; 1.24 Applicant submits that "Director" has been defined to include a director in the employment of the company. The definition of 'director' is an inclusive definition. A director refers to a director who has been in employment of the company on a fulltime basis and is also entitled to receive remu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, and includes any person- (i) employed by or through a contractor in or in connection with the work of the establishment; (ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961, or under the standing orders of the establishment . 1.31 The applicant submits that the whole time Directors of our company are appointed by the Board of Director in the company and are given various responsibilities thereby bringing them under the definition of an employee; 1.32 Further the Employees Provident Fund Scheme, 1952 also defines the employee as the one : Clause 2(e) "Employee" means a person appointed to or borne on the cadre of the staff of the Corporation, other than persons on deputation; 1.33 that this definition of an employee also completely brings the whole time Director under the definition of an employee as none of them are on deputation from any other organization; 1.34 that these definitions mentioned supra makes it clear that a director of the company is in the employment of the company and his services would be excluded from the provisions of C.G.S.T. Act, 2017 by way of exclusion provided in the serial No. I of the Schedule Ill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociation or terms of agreement. This was the view taken by the Supreme Court in AIR 1973 SC 637 = 1972 (8) TMI 61 - SUPREME COURT (supra), even though it was a case arising under the Income tax Act. One of the tests laid down to ascertain whether a person is a servant or an agent is to examine whether under the terms of his employment, the employer exercises a supervisory control in respect of the work entrusted to him. A servant acts under the direct control and supervision of his master, whereas the agent in exercise of his work is not subjected to the direct control or supervision of the principal, though he is bound to exercise his authority in accordance with all lawful orders and instructions which may be given to him from time to time by his principal. After examining the articles of association of the Company the Supreme Court came to the conclusion that powers of the Managing Director had to be exercised within the terms and limitations prescribed thereunder and subject to the control and supervision of the Directors, which, would indicate that he was employed as a servant of the Company. 1.37 that the above view was also held by the Hon'ble Supreme Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. He requested for early disposal of the application. 4 COMMENTS OF THE JURISDICTIONAL OFFICER The jurisdictional officer (Assistant Commissioner, State Tax, Special Circle-Il, Jaipur, Room No.322,2nd Floor, J-14, Zonal Kar Bhavan, Jhalana Institutional Area, JLN Marg Jaipur, Rajasthan 302004) has submitted his comments vide letter dated 03.01.2020 which can be summarized as under: - 1- The salary paid to the Directors by the Company, 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 (salary) 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/RGST Act,2017 and the supplier of such service is the Director. 2-Notification No. 13 / 2017 - Central Tax (Rate) dated 28.06.2017 and Notification F. dated 29.06.2017 stated 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 who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;" 5.7 we observe that the consideration paid to the Director for the supply of services to the Company is specifically covered under Notification No. 13 /2017- Central Tax (Rate) dated 28.06.2017 which 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 th ..... 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