1. The document provides updates on tax compliance deadlines in India for May 2020, including extensions granted due to COVID-19. Key dates are extended for income tax returns and refunds, GST returns, TDS/TCS statements, and other compliance requirements. 2. The CBDT has extended various tax payment and compliance deadlines that were falling between March 20 to June 30, 2020 to June 30, 2020. This includes deadlines for income tax returns and refunds, TDS/TCS statements, and other requirements. 3. Due dates for GST returns have also been extended, with the deadline for GSTR-3B returns for April-May 2020 being June 12th/14

1. 1.MAYDUEDATES
2.INCOMETAXUPDATES
3.GSTUPDATES
4.TDSRATECHARTFY20-21
5.GSTONDIRECTOR'SREMUNERATION-ANALYSIS
TAX MONTHLY NEWSLETTER
MAY-2020
CONTENTS

2. 1
MAY COMPLIANCE CALENDAR
INCOME TAX
The CBDT vide the Taxation and Other Law (relaxation of certain provisions)
Ordinance, 2020 dated 31/03/2020 has extended all respective due dates falling during
the period from 20/03/2020 to 29/06/2020, till 30th June, 2020. The benefit of above
extended due date shall not be available for payment of tax. Delay in tax payment in
this period attract lower rate of 0.75% for every month or part thereof
DATE AREA PARTICULARS
7th
May TDS Due date for deposit of Tax deducted/collected for the
month of April, 2020
15th
May TDS  Due date for furnishing of Form 24G by an office of
the Government where TDS for the month of April,
2020 has been paid without the production of a
challan
15th
May TDS  Issue of TDS Certificate u/s 194-IA, 194-IB, 194-M.
 Quarterly statement of TCS for Q4
30th
May TDS Submission of a statement (in Form No. 49C) by non-
resident having a liaison office in India for the financial
year 2019-20.
31st
May TDS Quarterly statement of TDS deposited for the quarter
ending 31st
March, 2020
31st
May Income Tax Due date for furnishing of statement of financial
transaction (in Form No. 61A) as required to be
furnished under sub-section (1) of section 285BAof the
Act respect of a financial year 2019-20.
31st
May Income Tax Due date for e-filing of annual statement of reportable
accounts as required to be furnished under section
285BA (1)(k)(in Form No. 61B) for calendar year 2019
by reporting financial institutions.

3. 2
GST
Due dates for filing GSTR 3B
Month Due
date
Extended due date
Turnover <1.50
Cr
Turnover between 1.50 Cr to 5 Cr
February
20
20
March
30 June 2020 29 June 2020
March 20 20 April 3 July 2020 29 June 2020
April 20 20 May 6 July 2020 30 June 2020
May 20 20 June 12 / 14 July
2020
12 / 14 July 2020
*Original due dates in case of states in list I is 22nd
of subsequent month and 24th
of
the subsequent month for states in list II
 No late fee would be applicable if the return is filed on or before due dates.
 In case of companies having turnover less than 5 crores, interest will not be
applicable if return is filed on or before due dates.
States List I - due date 12 July 2020
Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala,
Tamil Nadu, Telangana, Andhra Pradesh, Daman & Diu and Dadra & Nagar
Haveli, Puducherry, Andaman and Nicobar Islands, Lakshadweep
States List II - due date 14 July 2020
Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh,
Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura,
Meghalaya, Assam, West Bengal, Jharkhand, Odisha, Jammu and Kashmir,
Ladakh, Chandigarh, Delhi
 For companies having turnover exceeding 5 crores, interest will be applicable as
follows:
Month Due
date
Interest
Till specified
date - Nil
On or after specified
date but before 24
June 2020 - 9%
After 24 June
2020 - 18%
February
20
20
March
4 April 2020 5 April 2020 24 June 2020
March 20 20 April 5 May 2020 6 May 2020 24 June 2020

4. 3
April 20 20 May 4 June 2020 5 June 2020 24 June 2020
 Interest at 9% will be applicable from the date specified in the respective column
till the date of payment.
 Interest at 18% will be applicable from the original due date if the return is not
filed on or before 24 June 2020.
Due dates for filing GSTR-1
Month Due date Extended due date
February 20 11 March 30 June 2020
March 20 11 April 30 June 2020
April 20 11 May 30 June 2020
January - March 20
(quarterly return)
30 April 30 June 2020
Due dates for composition dealers
Period Return Extended due date
January - March
2020
CMP-08 7 July 2020
FY 2019 - 20 GSTR-4 15 July 2020
Due dates for person opting for composition levy in FY 2020-21
Period Return Extended due date
FY 2019 - 20 ITC-03 (reversal of ITC on
opting for composition)
31 July 2020
FY 2020 - 21 CMP-02 (opting for composition) 30 June 2020
Due dates for other returns
Period Return Extended due date
March,
April,
May
GSTR-5 - Return for Non-Resident
Taxpayers
30 June 2020
GSTR-6 - Return for Input Service
Distributors
30 June 2020
GSTR-7 - Return for TDS deductors 30 June 2020
GSTR-8 - Return for TCS collectors 30 June 2020

5. 4
INCOME TAX UPDATE
IT Department to release all pending
income tax refunds up to Rs 5 lakhs
immediately-Press Release-
08/04/2020 - It has been decided to
issue all the pending income-tax refunds
up to Rs. 5 lakh, immediately. This would
benefit around 14 lakh taxpayers. It has
also been decided to issue all pending
GST and Custom refunds which would
provide benefit to around 1 lakh business
entities, including MSME. Thus, the total
refund granted will be approximately Rs.
18,000 crore.
Press Release- 15/04/2020 - In
pursuance to the Government’s decision
above press note to issue pending
income tax refunds up to Rs 5 lakh in
order to help taxpayers in a COVID-19
pandemic situations, the Central Board of
Direct taxes (CBDT) today said that it
has already issued over 10.2 lakh
refunds totalling to around Rs. 4,250
crore as on 14th April 2020. These
refunds are over and above the 2.50
crore refunds already issued in FY 19-20
till 31st March 2020 totalling Rs 1.84
lakh crore.
The CBDT further said that about 1.75
lakh more refunds are in the process of
issuance in this week. These refunds
would get credited directly to the
taxpayer bank account in 5-7 business
days from issuance. However, in around
1.74 lakh cases, email responses are
awaited from taxpayers regarding
reconciliation with their outstanding tax
demand for which a reminder email has
been sent asking them to respond within
7 days so that the refund can be
processed accordingly.
CBDT allows donations to PM cares
fund through form 16- F No.
178/7/2020-ITA-I- 09/04/2020 -
The donations made to the “PM CARES
FUND” are eligible for deduction u/s
80G of the Income-tax Act. In cases
where donation is made to the Fund by
an employee through his/her employer,
the Fund may not be able to issue
separate certificate to every such
employee in respect of the donation so
made, as the contributions made to the
Fund are in the form of a consolidated
payment. It is hereby, clarified that the
deduction in respect of such donations as
indicated above will he admissible u/s
80G of the Act on the basis of the Form
16/Certificate issued by the Drawing and
Disbursing Officer (DDO)/Employer in
this regard.
Clarification for assessee in default
in respect of transactions effecting
TDS higher surcharge amount-
Circular No. 8/2020-13/04/2020 -
The enhanced TDS rates of surcharge
passed through Finance (No.2) Act. 2019
it was applicable from 1st April, 2019 for
previous year 2019-20 relevant to
assessment year 2020-21.Clarification
provides assessee not be considered to
be an assessee in default in respect of
transactions where-
a) such transaction has been completed
and entire payment has been made to
the deductee/payee on or before
5th July, 2019 and there is no

6. 5
subsequent transaction between the
deductor/collector and the
deductee/payee in the financial year
2019-20 from which the shortfall of tax
could have been deducted/collected by
the deductor/collector;
b) TDS has been deducted or TCS has
been collected by such deductor/collector
on such sum as per the rates in force as
per the provisions prior to the enactment
of the Act;
c) Such tax deducted or collected has
been deposited in the account of Central
Government by the deductor/collector on
or before the due date of depositing the
same;
d) TDS/TCS statement has been
furnished by such person on before the
due date of filing of the said statement.
Further, if the deductor/collector has
deducted/collected shortfall of
tax after 5th of July, 2019 from the
transaction(s) made subsequently after
the said date, interest, if any, for delay
in deduction/collection of such tax shall
not be levied.
Clarification in respect of option
under section 115BAC of the
Income-tax Act, 1961 - Circular
C1/2020- 13/04/2020 - provides that
a person, being an individual or a Hindu
undivided family having income other
than income from business or
profession”, may exercise option in
respect of a previous year to be taxed
under the said section 115BAC along
with his return of income to be furnished
under sub-section (1) of section 139 of
the Act for each year. The concessional
rate provided under section 115BAC of
the Act is subject to the condition that
the total income shall be computed
without specified exemption or
deduction, setoff of loss and additional
depreciation.
It hereby clarifies that an employee,
having income other than the income
under the head “profit and gains of
business or profession” and intending to
opt for the concessional rate under
section 115BAC of the Act, may intimate
the deductor, being his employer, of
such intention for each previous year and
upon such intimation, the deductor shall
compute his total income, and make TDS
thereon in accordance with the
provisions of section 115BAC of the Act.
It is also clarified that the intimation so
made to the deductor shall be only for
the purposes of TDS during the previous
year and cannot be modified during that
year. However, the intimation would not
amount to exercising option in terms of
sub-section (5) of section 115BAC of the
Act
Clarification on provision of Vivad se
Vishwas scheme -Circular No.
9/2020-22/04/2020 – provides for
dispute resolution in respect of pending
income tax litigation pursuant to budget
announcement, the Direct Tax Vivad Se
Vishwas Act, 2020. 55 Q&A issued under
this circular for clarification. Click here
to read.
CBDT defer GST & GAAR Reporting in
Tax Audit Report by one more year -
Circular No. 10/2020-24/04/2020 -
it has been decided by the Board that the
reporting under clause 30C and clause
44 of the Tax Audit Report shall be kept
in abeyance till 31st March, 2021.

7. 6
Extension of Quarterly TDS/TCS
statement filings - Circular No.
NSDL/TIN/ 2020/006- 20/04/2020-
The timelines to submit the quarterly
TDS/TCS statement has been extended.
The revised timelines to finish the
TDS/TCS statement for quarter four for
financial year 2019-20 is till June 30,
2020. While due date of payment is
same 30/04/2020
CBDT revising Income Tax return
forms due to Covid-19 Release ID:
1616035-19/04/2020- To avail full
benefits with various timeline extensions
up to 30th
June, 2020 granted by the
government, it has initiated necessary
changes in the return forms so that
taxpayers could take benefits of their
transactions carried out during the period
from 1st April 2020 to 30th June 2020 in
the return forms for FY 2019-20.
Accordingly, the time for making
investment/ payments for claiming
deduction under Chapter-VIA-B of IT Act
which includes Section 80C (LIC, PPF,
NSC etc.), 80D (Mediclaim), 80G
(Donations), etc. for FY 2019-20 has also
been extended to 30thJune 2020.
Also, the dates for making
investment/construction/purchase for
claiming roll over benefit in respect of
capital gains under sections 54 to section
54GB has also been extended to
30th June 2020. Therefore return forms
are being revised to facilitate reporting of
the transactions of the relief period.
CBDT notifies Protocol between
India and Austria Circular No.
22/2020 - 24/04/2020- the Protocol,
amending the Convention between the
Government of the Republic of India and
the Government of the Republic of
Austria for the avoidance of double
taxation and the prevention of fiscal
evasion with respect to taxes on income.
Click here to read

8. 7
GST UPDATES
Notification 37/2020-Central Tax -
28/04/2020- The GST Portal has
enabled the PMT-09. This enables a
registered taxpayer to transfer any
amount of tax, interest, penalty, etc.
that is available in the electronic cash
ledger, to the appropriate tax or cess
head under IGST, CGST and SGST in
the electronic cash ledger.
Hence, if a taxpayer has wrongly paid
CGST instead of SGST, he can now
rectify the same using Form PMT-09 by
reallocating the amount from the CGST
head to the SGST head.
Notification 38/2020 Central Tax-
05/05/2020 - Filling through EVC
and SMS- Rules 26 of the CGST Rules
provides that person registered under
the provisions of the Companies Act,
2013 shall furnish the documents or
application verified through digital
signature certificate (DSC).
Through Notification 38/2020, such
companies have been allowed to furnish
the returns under Section 39 i.e. GSTR
3B through electronic verification code
(EVC) during the period from the 21st
April till 30 June, 2020.
Rule 67A has been inserted so as to
allow filing of Nil returns in Form GSTR-
3B (or return with no entries) through
SMS using the registered mobile
number and OTP based verification. The
said rule will be applicable from the date
yet to be notified.
Notification 39/2020 Central Tax-
05/05/2020 - Corporate Debtors who
were not in default of filing GST returns
prior to the appointment of IRP/RP shall
not be required to follow special
procedure; and new registration to be
obtained within 30 days of appointment
of the IRP/RP or by 30 June 2020,
whichever is later.
Circular No. 138/08/2020-GST has
been issued in this regard clarifying the
issue. Click here to read detailed
clarification
Notification 40/2020 Central Tax-
05/05/2020 - The validity of e-way
bills generated on or before 24th March
whose period of validity expires during
20th March and 15th April shall be
deemed to have been extended till the
31st May, 2020.
Notification 41/2020 Central Tax-
05/05/2020 - The time limit for
furnishing the annual return specified
under Section 44 i.e. GSTR-9 for the
financial year 2018-2019 has been
extended till 30th September, 2020.
Notification 42/2020 Central Tax-
05/05/2020 - extends the due dates
for furnishing GSTR-3B for the persons
having principal place of business is in
the Union Territories of Jammu &
Kashmir and Ladakh.

9. 8
HIGH COURT CASES
Delhi High Court reads down
Paragraph 4 of Circular
26/26/2017-GST restricting the
rectification of GST returns in the
same tax period
The High Court observed that on a plain
reading of the Section 37, 38 and 39, it
clearly emerges that the statutory
scheme, as envisaged under the Act
provided a facility for validation of
monthly data through the IT System of
the Government wherein the output of
dealer reported in GSTR-1 becomes the
input of another dealer and gets auto-
populated in GSTR-2. These details had
to be electronically populated in GSTR-3
and tax had to be paid based on this
return.
However, due to under preparedness
with regard to the extent of data to be
processed and issues with the system,
GSTR-2 and GSTR-3 were not made
operational, rather a summary return in
Form GSTR-3B was introduced; and the
auto-populated details of ITC available
on the supplies reported by the vendors
was made available only in September
2018.
Basis this, the High Court was inclined
that if the GST return system as
originally envisaged had been
operational, Petitioner would have
known with reasonable certainty the
amount of ITC available to them and
could have utilised the same for
payment of taxes. With the introduction
of GSTR-3B in place of GSTR-2 and
GSTR-3, the form originally
contemplated got fundamentally altered
with the checks and balances prescribed
in the original forms being effaced and it
could not be ruled out that this possibly
caused inaccuracies to creep in the
Petitioner’s data.
As a consequence, the deficiency in
reporting the eligible ITC in the months
of July - September 2017 resulted in
excess payment in cash and the
Petitioner was not in a position to fully
liquidate the same. The High Court
observed that even if there is a
possibility to adjust the accumulated
ITC in future, that cannot be a ground
to deprive the Petitioner the option to
fully utilize the ITC which it is statutorily
entitled to do so.
The High Court further observed that
there could be no reason as to why the
rectification/adjustment can be allowed
in the month subsequent to when such
errors relate, but not in the same tax
period. The restriction if any, that can
be introduced by way of a Circular, has
to be in conformity with the scheme of
the Act and the provisions contained
therein. The subordinate legislation
must conform to the statute under
which it is made, and they cannot
whittle down the benefits granted under
statutory provision. Thus, the constraint
introduced by Paragraph 4 of the
impugned Circular, was held as arbitrary
and contrary to the provisions of the
Act.
Accordingly the Petitioner was allowed
to rectify/adjust the ITC for the period
to which it relates and claim refund of
the excess amount paid in cash.
Issuance of SCN/ initiation of
proceedings is a pre-requisite for
determination of interest liability
under Section 50 - Jharkhand High

10. 9
Court in the case of MAHADEO
CONSTRUCTION CO.
The High Court held that if an assessee
has allegedly delayed in filing return,
but discharges the liability of only tax on
his own ascertainment and does not
discharge the liability of interest, the
only recourse available to the tax
department would be to initiate
proceedings under Section 73(1) for
recovery of the amount of short paid or
not paid interest on the tax amount.
The liability of interest under Section 50
of the CGST Act is not automatic, but
the said amount of interest is required
to be calculated and intimated to an
assessee, more particularly, when the
assessee disputes with regard to the
period for which the tax alleged to have
not been paid or quantum of tax
allegedly remains unpaid. If an assessee
disputes the liability of interest i.e.
either disputes its calculation or even
the leviability of interest, then the only
option left for the Assessing Officer is to
initiate proceedings either under Section
73 or 74 of the Act for adjudication of
the liability.
Further, with regard to the garnishee
proceedings initiated under Section 79
for recovery of interest without
adjudicating the liability of interest,
when the same is admittedly disputed
by the assessee, the High Court held
that till adjudication is completed, the
amount of interest cannot be termed as
an amount payable under the Act or the
Rules and thus, without adjudication
proceedings, no recovery proceeding
under Section 79 of the Act can be
initiated for recovery of the interest
amount.
ADVANCE RULINGS
Supply of power packs, freight and
insurance is a composite supply,
installation and commissioning
constitutes independent supply-
AAR- Karnataka in the application by
SAN ENGINEERING & LOCOMOTIVE
COMPANY LIMITED
The applicant in the instant case had a
contract for supply of twin power pack
with underslung engine and hydraulic
transmission and commissioning /
installation of the same. The
components involved in the overall
supply were under:
 Supply of power packs
 Freight and insurance related to
the power packs
 Supply of Installation and
Commissioning service.
The authority held that freight and
insurance charges would form part of
the value of supply of power packs,
since the contract was a contract for
supply of power packs and the value of
the contract shall be the sum total of
the value of the power pack plus all
charges charged to the recipient for
anything done till the goods are
delivered to the recipient.
Such supplies being naturally bundled
and supplied in conjugation with each
other in the normal course would be
covered by definition of the term
composite supply as per Section 2(30).
The installation and commissioning
could be carried out by the recipient
either themselves or they can avail the
services from any other supplier of
service. Thus installation and

11. 10
commissioning were not a part of the
supply, but an independent service
contract given to the applicant.
The property with 42 single rooms
given out for sub-renting matched
that of a hotel which can by no
imagination be termed as
residential dwelling – AAR- Karnataka
in the application by SRI TAGHAR
VASUDEVA AMBRISH
The authority held that exemption under
entry 13 of Notification 9/2017
Integrated Tax (Rate) i. e. services by
way of renting of residential dwelling
cannot be availed in case of renting out
a property on commercial basis, which
is in turn sub-let to individuals along
with additional facilities and amenities.
The authority observed that the
property, consisting of 42 rooms along
with 2,400 sq ft of terrace area, cannot
be termed as a residential dwelling -
they are like hotel rooms which can by
no imagination be termed as a
residential dwelling. Even if the same
was given for residential purposes, the
services provided was not for use as
residence by the lessee.
Thus with this ruling, lessors may not
have the comfort of presuming GST to
be exempt, where end use of the
property is residential.
Eligibility to opt for scheme of
payment of tax prescribed under
Notification 2/2019 Central Tax
(Rate) for a composition dealer –
AAR- Karnataka in the application by
EMPATHIC TRADING CENTRE
The applicant was engaged in the
business of supply of goods and in
another unrelated business of renting of
immovable properties. The aggregate
turnover of both the businesses
together was less than Rs. 50 lakhs.
The Authority highlighted that since the
applicant was supplying services, if the
turnover of services of the applicant
exceeds ten per cent of turnover in a
State or Union territory in the preceding
financial year or five lakh rupees,
whichever is higher, then he shall not be
eligible to opt for composition scheme
under Section 10, even if the applicant
obtains separate registration, one for
the goods and other for the services
Further, Notification 2/2019 Central Tax
(Rate) was not issued under Section 10,
and hence cannot be termed as a
composition scheme - rather it is an
optional scheme applicable for regular
taxpayers. The condition for opting for
payment under the said scheme is that
the person should not be registered for
payment of tax under composition
scheme prescribed under Section 10.
Thus, the applicant was not eligible to
avail the option under the said
Notification as long as he continues to
be registered as composition taxpayer.
If the applicant opts out of the
Composition levy, he would be able to
avail option under the said Notification.
The amount of subsidy provided by
Government shall be included in
transaction value if it is not directly
linked to the price – AAR - Karnataka
in the case of MEGHA AGROTECH
PRIVATE LIMITED

12. 11
The authority observed that the
applicant vendor and the farmer were
not related person, and the price was
payable by the farmer irrespective of
the fact that he receives assistance from
the Government or whether the bank
makes the payment or not. Hence price
was the sole consideration for supply
and the entire invoice value would be
the transaction price.
Further, only the subsidies provided by
the Government that are directly linked
to the price would be excluded from the
value of taxable supply. In the instant
case, the subsidy is received by the
farmer and at the instance of the
farmer, disbursed to the vendor. The
mode of disbursement has no impact on
the price of the supply and the liability
of the farmer get extinguished only
when the vendor receives the
consideration - it is immaterial from
whom he actually receives the amount.
Hence the amount of subsidy provided
to farmer would not be excluded from
transaction value in terms of Section
15(2)(e) of the CGST Act.
Applicability of Rule 32(5) in case of
purchase and sales of second hand
gold jewellery - AAR Karnataka in the
case of ATTICA GOLD PVT LIMITED
The Authority for Advance Rulings held
that subject to invoicing jewellery as
second hand goods, thereby
differentiating them from the fresh
supplies where the scheme under Rule
32(5) does not apply, supply of second
hand jewellery by the applicant satisfies
the conditions for availing the benefit of
valuation under the margin scheme if
there has been no material alteration or
change in form of such jewellery and no
ITC was availed on such purchase.
The Authority further held that in case
of purchase of such second hand
jewellery from the dealer availing
margin scheme, the applicant will have
an option either to avail ITC subject to
Section 16 of the CGST Act and forego
the option under Rule 32(5) or forego
ITC and avail the option under Rule
32(5).

13. 12
NEW TDS RATES FY 2020-21 [w.e.f - 14/05/2020]
SECTION
CODE
DESCRIPTION
FY 20-21 [AY 21-22] FY 19-20 [AY 20-21]
TAX
MONETARY
LIMIT
TAX
MONETARY
LIMIT
192A
Accumulated PF balance
due to employees
7.5% Rs. 50,000 10% Rs. 50,000
193 Interest on securities 7.5% Rs. 5,000 10% Rs. 5,000
194A
Interest other than interest
on securities
7.5%
Banking Co./
Co-op society/
Post Office-
Rs. 40,000
Others - Rs.
5,000
10%
Banking Co./
Co-op society/
Post Office- Rs.
40,000
Others - Rs.
5,000
194B
Winning from Lottery or
Crossword Puzzle
22.5% Rs. 10,000 30% Rs. 10,000
194C
Payment to Contractor and
Sub- Contractors
0.75% - to
Individual &
Huf
1.5 % in
other case
Rs. 30,000 in
single payment
or Rs.
1,00,000 in
aggregate in a
year
1% - to
Individual
& Huf
2% in
other case
Rs. 30,000 in
single payment
or Rs. 1,00,000
in aggregate in
a year
194H Commission or Brokerage 3.75% Rs. 15,000 5% Rs. 15,000
194I Rent
[a] Rent of
P&M –1.5%
[b] In other
Case –
7.5%
Rs. 1,80,000
[a] Rent of
P&M – 2%
[b] In
other Case
- 10%
Rs. 1,80,000
194IA
Payment to a Resident
Transferor for transfer of
any immovable property
0.75% Rs. 50,00,000 1% Rs. 50,00,000
194IB
Payment of rent by an
Individual/ HUF not subject
to tax audit
3.75%
Rent exceeds
from Rs.
50,000/- p.m.
or Part of
Month
5%
Rent exceeds
from Rs.
50,000/- p.m.
or Part of
Month
194IC
Payment under joint
Development agreement to
a resident Individual / HUF
7.5%
Effective from
1st April, 2017
10%
Effective from
1st April, 2017
194J
Fees for Professional or
Technical Services
7.5% [for
call centre
– 1.5%)
Rs. 30,000 10% Rs. 30,000

14. 13
ARTICLE: APPLICABILITY OF GST ON THE
DIRECTOR’S REMUNERATION - AN ANALYSIS
The Authority for Advance Rulings in
Karnataka, in the application by Anil
Kumar Agrawal recently held that
remuneration received by the applicant as
executive director, being employee of the
company would not be subject to GST.
However on the same issue, the Authority
for Advance Ruling in Rajasthan in the
case of Clay Craft India Private Ltd upheld
the levy of GST under reverse charge
mechanism on remuneration/salary paid to
the directors - similar view was also taken
by the Karnataka AAR in the case of Alcon
Consulting Engineers (India) (P.) Ltd.
The later AAR held that directors are not
the employees of the company,
consequently, remuneration paid to them
would not be covered under Schedule III.
The question arises as to whether the AAR
was justified to consider directors as
service providers and the salary paid to
them as consideration for the services
rendered. One important aspect which was
not touched upon by the AAR was as to
why director cannot be regarded as
employee of the company in spite of the
fact that there were on the payroll of the
company and like other employees TDS
under income tax and PF was also duly
deducted from their salary.
In this write-up, we have analysed the
modes of employment of directors along
with their nature of engagement under the
Companies Act, treatment of consideration
received by them under Income-tax Act
and the erstwhile indirect-tax regime in
respect of the services.
Provisions under the Companies Act
As per Section 2(34) of the Companies
Act, 2013 ‘director’ means a director
appointed to the Board of a company.
Such directors who are in the whole-time
employment or those who are entrusted
with day-to-day operations of the
company are termed as 'executive
directors' while non-executive directors do
not take part in the day-to-day activities of
the company.
Besides, as per Section 149(6) of the
Companies Act, 2013, a person other than
director not being a managing director or a
whole-time director or a nominee director
can be appointed as ‘independent
director’.
The non-executive and independent
directors do not work under the control
and supervision of the company, but are
appointed to bring on board their
professional expertise or an oversight, and
therefore when they have such discretion,
the presumption can be that such person
is not an employee.
Further, as per Section 2(78) of the
Companies Act, 2013, ‘remuneration’
means any money or its equivalent given
or passed to any person for services
rendered by him and includes perquisites
as defined under the Income-tax Act. Non-
executive and independent directors are
paid sitting fees for attending

15. 14
board/committee meetings, while such
fees if paid to managing or whole-time
directors, would be treated at par with
'other allowance' and would be subject to
the limit of managerial remuneration
prescribed in Schedule-V of the Companies
Act, 2013.
Provisions under the Income Tax Act
The Income Tax Act, 1961 does not have
enumerated principles for taxing the
remuneration of directors of the company,
however, it is guided by the general
principle that remuneration in the course
of employment is taxed under the head
‘salary’ and would be subject to TDS, else
would be assessable as ‘profit and gains
from business or profession’ or ‘income
from other sources’.
Provisions under the erstwhile
Finance Act for levy of Service Tax
In the erstwhile service tax regime,
services rendered by an employee to the
employer in the course of or in relation to
employment were outside the scope of
service tax. This has been acknowledged
in various precedence and departmental
circulars as cited below:
a. Judicial precedence
- In the case of Allied Blenders and Distillers
(P.) Ltd, CESTAT held that the
remuneration paid to whole-time directors
after deductions on account of provident
fund, professional tax and TDS as
applicable has to be treated as salary,
more so when these directors were
represented as employee of the company
before all statutory authorities and their
remuneration was also assessed by
Income Tax authorities as salary - hence
service tax was not applicable on such
remuneration.
- In the case of Rent Works India Pvt. Ltd,
CESTAT held that Service Tax authorities
cannot seek to levy the tax where the
remuneration paid to the director was
assessed as salary under the Income Tax.
b. Departmental circulars
- CBIC had clarified that the functions
performed by the managing director or the
whole-time/independent director as a part
of the Board are in nature of management
function, and the payments made by
companies to its such directors could not
be termed as payments made for
providing the management consultancy
service and cannot be termed as
'commission' within the scope of business
auxiliary service for levying service tax.
- The Ministry of Corporate Affairs had
clarified that "The Non-Whole Time
Directors of the company are presently not
covered under the exempted list and as
such, the sitting fees/commission payable
to them is liable to Service Tax. Service
tax is payable on the commission/sitting
fees payable to Non-Whole Time Directors
of the company."
As an extension to this, it can be derived
that such sitting fees/commission paid to
whole-time directors did not attract service
tax at that time.
Analysis of the applicability of GST
Section 7(2) of the Central Goods and
Services Tax Act provides that activities or
transactions specified in Schedule III of
the Act would be treated neither as a
supply of goods nor a supply of services.
Schedule III, interalia includes "services
by an employee to the employer in the
course of or in relation to his employment"

16. 15
in its ambit. Therefore, such activities
cannot be considered as supply so as to be
leviable to GST.
The Notification 13/2017 issued under
Section 9(3) of the said Act specifies the
category of the supplies wherein the
recipient would be liable to pay tax under
reverse charge. The relevant entry of the
notification is as under:
Sr.
No.
Category
of supply
of
services
Supplier
of
service
Receipient
of service
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
On reading the Notification 13/2017 in
context of supply as per Section 7, even if
the transaction gets covered within the
scope of supply as per Section 7(1), it
would be excluded from the levy by the
overriding effect that Section 7(2) read
with Schedule III has on it.
Therefore, applicability of GST in
remuneration to directors has to be
primarily determined in view of the
capacity in which the directors are working
i.e. employment and contractual terms.
Any remuneration paid to directors in the
course of or in relation to their
employment with the company would be
covered under Schedule III and hence
cannot be regarded as a supply for the
purpose of levying GST. In other words,
GST could be levied only the services of
the directors who are not employee of the
company and tax can be collected thereon
from the company under reverse charge.
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17. 16
the facts, law and contents of the publication with original Government publication or notifications. No one should act on
such information without appropriate professional advice after a thorough examination of the particular situation.