Services by directors to companies not taxable under GST RCM: CBIC.

The central Board of Indirect Taxes and Customs (CBIC) on Tuesday clarified that Companies are not required to deduct GST under reverse charge mechanism (RCM) on services such as renting of immovable property provided by directors in his personal capacity.

The clarification came after the goods and services tax (GST) council in its meeting on July 11 decided that GST will be imposed only on services which are provided by directors in their official capacity to the company.

Under RCM, entity receiving the services are required to deduct GST while making payments to the supplier. The industry had sought clarification on whether services supplied by a director of a company or body corporate in personal or private capacity, such as renting of immovable property to the company, are taxable under RCM or not. Industry was receiving lot of tax notices for this due to lack of clarity in law.

“It is 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,”it said.

Experts, however say that there are still many grey areas. AMRG & Associates senior partner Rajat Mohan said this is quite a restrictive clarification that has neither clarified 'personal capacity' nor 'indicated an illustrative list of personal services provided by a director'.

“Taxation of other director services like bank guarantee, advisory services, training services and planning services would continue to be a grey area for the industry unless CBIC gives unambiguous rules for categorization of 'director services',” Mohan said.