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RTP GST Series May 2024 (Part-8 : GST on Service by Independent Directors)

We have started a RTP series on GST in MCQ form where we will post MCQs along with detailed Explanations along with additional questions surrounding the concepts asked in RTP for GST CA Final issued for May 2024.


Please join our whats app channel (Fab Gyan) so that you can find details of Each Part of RTP Series on GST for Final May 2024.


GST on Service by Independent Directors


Facts


Mr.  X,  a  chartered  accountant  and  an independent director of the company, is also a partner in ABC LLP, a chartered  accountant  firm  in  Delhi.  ABC  LLP  provided professional services to the company during the month.  The LLP has issued an invoice for Rs. 1,50,000 on the head office in the month of January.


Question: How this Supply will be taxed ? (RCM or Forward Charge)


Answer: Forward Charge (Explanation is given in next section)


Facts: Another  independent  director,  Mr.  Z,  on  account  of  his  long-term relationship with the Company, has provided personal guarantee of Rs. 1 crore to Dhandhan Bank for loan taken by the company during the month of January. He has not charged any commission or brokerage for the same.


Question: The value of supply of the service of providing personal guarantee by Mr. Z  to Dhandhan  Bank for  sanctioning  of  credit  facilities  to the company is ?


Option:

(a)     Nil since it is not a supply under GST.


(b)   Nil. Services provided by a director to a company is deemed as supply, even without consideration, under Schedule I of the CGST Act, 2017. However, since as per RBI Guidelines, no consideration can  be  paid  to  the  director  by  the  company  for  providing guarantee, Open Market Value (OMV) of said supply will be zero.


(c)      1% of the amount of the guarantee provided, i.e. Rs. 1 lakh.


(d)     10% of the amount of the guarantee provided, i.e. Rs.10 lakh.


Answer: Option "B"


Question: Sitting Fee Paid to the Independent Directors for attending meeting ? (RCM or Forward Charge).


Answer: RCM


Question: Commission Paid to the Independent Directors ? (RCM or Forward Charge).


Answer: RCM


Question: Independent Director gives commercial property on rent to the Company. (RCM or Forward Charge).


Answer: Forward Charge


Explanation


As per Notification No. 13/2017 following service apart from other is under RCM


" Services supplied by a director of a company or a body corporate to the said company or the body corporate"


Now question comes whether service provided in personal capacity would also be covered under RCM like if one independent director is CA and providing CA consultancy service also to the Company.


This has been clarified by the Circular No. 201/13/2023-GST in which it has been clarified that :


It is hereby clarified that services supplied by a director of a company or body corporate to the company or body corporate in his private or personal capacity such as services supplied by way of renting of immovable property to the company or body corporate are not taxable under RCM. Only those services supplied by director of company or body corporate, which are supplied by him as or in the capacity of director of that company or body corporate shall be taxable under RCM in the hands of the company or body corporate


Accordingly, Services provided as CA or Rent is not covered under RCM.


Further, for Personal Guarantee , circular 204/16/2023-GST has clarified that though it is a supply in lieu of Schedule-I supply, but its OMV will be considered as Zero until unless some amount is payable to the Director.


Apart from this, other services like sitting fee, commission paid to the independent directors is covered under RCM.


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In case of any query, please raise in Comment Section.


Disclaimer: We have taken due care to the best of our knowledge while explaining the provisions surrounding the issue purely for informational/academic purpose. It should not be considered as professional advice or consultancy to be relied upon. While due care has been taken by Fab Gyan in preparing this article, certain mistakes and omissions may creep in. The Fab Gyan or its Author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.





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