Karnataka AAR – Anil Kumar Agrawal – Executive Director Salary exempt from GST

Type of Income

Includible in Aggregate Turnover

Remuneration of Partner for Partnership remuneration

No. Since any type of salary is not includible in the purview of GST as the same needs to be treated neither as​​ supply of goods nor as supply of services.

Director’s salary from Private Limited Company

Rent on commercial property

Yes

Rent on residential property

No. Although it is an exempted service.

Remaining cases

No. Since all the 15 cases have been outside​​ the purview of GST.

Clause in the Question

Particulars

Remarks

(a)

Partnership remuneration from​​ Partnership firm

The said Partnership remuneration being received by the Applicant as well as the share of profit received from the Firm shall not be covered within the purview of GST as it is not considered as supply of goods or services under clause 1 of​​ Schedule III of CGST Act 2017.​​ Hence, the said Partnership remuneration as well as the share of profit shall not be covered within the definition of Aggregate Turnover for the purpose of Registration.

(b)

Director Remuneration from a Private Limited​​ Company

For the said income, the same has to be differentiated between Executive Director and Non-Executive Director’s salary. In the case of the Executive Director salary, the same has been in the nature of the employment of the company, in which there is an employer-employee relationship between the company and the Director which is not considered as supply of goods or services or both. In the case of non-executive director’s salary, the same is exigible in the hand of the company under the Reverse Charge Mechanism under entry no. 6 of Notification No. 13/2017-Central Tax dated 28-6-2017. In the said question, it is no where mentioned as whether the salary is being received as an Executive Director or Non-Executive Director. Hence, the Ruling has mentioned that salary as Executive Director is​​ not includible in the Aggregate Turnover. However, the salary as non-executive director shall be includible in the Aggregate turnover even though it is taxable in the hands of company under RCM.​​ 

(c)

Interest income​​ on partner fixed capital credited to partner’s capital account

The interest income are out of the deposits ​​ loans extended by the applicant. The services by way of extending deposits, loans or advances in so far as the consideration is represented by way​​ of interest or discount (other than interest involved in credit card services) falling under SAC 9971 are exempted under Entry no. 27(a) of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017. Therefore, in these items, the amount of loans and advances are nothing but the value of services and is an exempted service.​​ Therefore, the said items should fall within the purview of Aggregate Turnover for the purpose of Registration.

(d)

Interest income on partner variable capital credited to partner’s​​ capital account

(e)

Interest received on loan given

(f)

Interest received on advance given

(g)

Interest accumulated along with deposit / fixed deposit

(h)

Interest income received on deposit / fixed deposit

(i)

Interest received on​​ debentures

(j)

Interest accumulated on debentures

(k)

Interest on Post Office deposits

(l)

Interest income on NSCs

(m)

Interest income credited on PF account

(n)

Accumulated interest (along with principal) received on closure of PF account

(o)

Interest income on PPF

(p)

Interest income on National Pension Scheme (NPS)

(q)

Receipt of maturity proceeds of life insurance policies

Although the premiums paid are taken as services being provided by the Insurance companies to the insured.​​ After the completion of the maturity period, there shall be no services involved.​​ Hence, the maturity proceeds shall not be includible in the aggregate turnover for the purpose of registration.

(r)

Dividend on shares

The income earned from securities are​​ nothing but the application of income. Therefore, in this case, the shares are excluded from the definition of goods or services and henceforth,​​ the income derived from the shares and securities shall also be excluded from Aggregate turnover for the​​ purpose of registration under the Act.

(s)

Rent on commercial property

The said service is supply in terms of section 7(1)(a) of the CGST Act 2017 which is taxable.​​ Hence, the value of supply shall be includible in the Aggregate turnover for the purpose of registration.

(t)

Residential Rent

The same has been considered as exempted supply under the CGST Act 2017 which shall be includible in the Aggregate turnover for the purpose of Registration.

(u)

Capital gain / Loss on sale of shares

The income earned​​ from securities are nothing but the application of income.​​ Therefore, in this case, the shares are excluded from the definition of goods or services and henceforth, the income derived from the shares and securities shall also be excluded from Aggregate turnover for the purpose of registration under the Act.