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RTP GST Series May 2024 (Part-II)

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.


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Question

Facts

Bond  amount  recovered  from  the  outgoing  Managing Director (residing in Kerala) of Dhairya Limited since he had left the employment before contracted period.


Qns: Whether it would be considered as Supply ?


Answer: No


Additional Qns: Payment of Rent to Director is covered into RCM ?


Answer: No, it is covered into forward charges and Director will be responsible for payment of GST if applicable.


Additional Qns: Whether Payment of Commission to Director is covered into RCM ?


Answer: Yes, as per Notification of RCM (13/2017), Services supplied by a director of a company or a Body Corporate to the said company or Body Corporate is under RCM.


Here, one point is to be noted that, Services provided by Directors as an Employee is not with in ambit of RCM.


Additional Qns: Would GST is payable on Booking Cancellation Charges by the Hotel, Airlines etc.


Answer: Yes at the same rate at which original service is taxable.



Explanation


CBIC has issued Circular No. 178/10/2022-GST dated 3rd August, 2022 where it has clarified that :


a. Notice period recovery from Employees is not a Supply of Service because it can not be covered into " Agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act" as per clause 5(e) of schedule II of CGST Act because the said amounts are recovered by the employer not as a consideration for tolerating the act of such premature quitting of employment but as penalties for dissuading the non-serious employees from taking up employment and to discourage and deter such a situation. Further, the employee does not get anything in return from the employer against payment of such amounts.


b. Cancellation charges recovered by Service Providers will be covered in " Agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act" because there is service of facilitation involved in booking of such service, therefore, cancellation fee charged by the Supplier should be considered as consideration against such facilitation fee. Accordingly, Cancellation fee should be taxed as original service as if it is bundled in the original service it self.


Further, CBIC has issued a Circular No. 201/13/2023-GST where by it has been clarified by the Board 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 under notification No. 13/2017-CTR (Sl. No. 6) dated 28.06.2017.


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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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