GST TIMES

Vol. I ; Issue - II ; 5 th May, 2020.

Editor’s Note:

Dear Readers,

We are pleased to release the second issue of GST Times. For the month of April, in
entirety, the country has observed a nationwide lockdown. The Government has
resultantly deferred the release of the GST revenue statistics to a future date. The
total GST revenue scores for the financial year 2019-20, however, have been released
and form a part of this newsletter. Notably, the average GST revenue has crossed the
magic threshold of Rs 100,000 crores in the last financial year- a feat that the current
financial year may not witness.

Moving on, some benches of the Authority for Advance Rulings (AAR) continue to
spring surprises. In Clay Craft India, the AAR bench in Rajasthan ruled that GST is
payable on reverse charge basis on Directors’ remuneration. Such decisions only go
to show that the exemption afforded vide Schedule III towards employer-employee
transactions is not watertight. Further, just when we thought that the creases in the
GST law was beginning to smoothen, the controversy on whether a computer
software qualifies as a ‘good’ or a ‘service’ resurfaced wherein it was concluded that
computer software qualifies as a ‘service’. The AAR Karnataka in Solize India
Technologies rules that certain types of software can also qualify as goods. The more
we try to move away from the erstwhile Service Tax laws, the closer we seem to be
going towards it. Both these rulings have been summarized in this issue.

During the month, the GST portal also provided a solution to an unintentional error
that a majority of taxpayers in the country may make by paying CGST/SGST instead
of IGST or vice-versa. Form GST PMT-09 has been enabled on the portal in which
taxpayers can self-adjust these errors. This is a welcome update and will come as a
welcome relief to many taxpayers.

Compliance requirements under GST has also undergone certain relaxations. Though
there is limited fiscal bandwidth to provide any stimulus under GST, taxpayers are
still looking for the same.

We hope you enjoy this issue.

Mohan R Lavi
Editor
GST TIMES
Page. 1
► Table of Contents:

GST Revenues during FY 2019 -2020 3-4

Summary of Notifications / Circulars / Orders issued during April 2020 5-6

Analysis of important Notifications 7-12

Analysis of Case Laws & Decisions 13-14

GST Alerts and Updates – GST PMT - 09 15-17

Monthly Article - Directors Remuneration in wake of the recent AAR 18-24

Page. 2
 ► GST Revenues- FY 2019-20:

► Following is the breakup of GST Revenues during FY 2019-20. [Rs. In crores]

IGST CESS Grand

Month CGST SGST
Domestic Customs Total Domestic Customs Total Total
April 21,163 28,801 31,444 23,289 54,733 8,115 1,053 9,168 1,13,865
May 17,811 24,462 25,016 24,875 49,891 7,172 953 8,125 1,00,289
June 18,366 25,343 25,792 21,980 47,772 7,581 876 8,457 99,938
July 17,912 25,008 26,366 24,246 50,612 7,754 797 8,551 1,02,083
August 17,733 24,239 24,140 24,818 48,958 6,432 841 7,273 98,203
September 16,630 22,598 22,972 22,097 45,069 6,892 728 7,620 91,917
October 17,582 23,674 25,071 21,446 46,517 6,833 774 7,607 95,380
November 19,592 27,144 28,080 20,948 49,028 6,858 869 7,727 1,03,491
December 19,962 26,792 26,804 21,295 48,099 7,484 847 8,331 1,03,184
January 20,944 28,224 29,532 23,481 53,013 7,813 824 8,637 1,10,818
February 20,569 27,348 27,758 20,745 48,503 7,907 1,040 8,947 1,05,366
March 19,183 25,601 26,452 18,056 44,508 7,465 841 8,306 97,597
Total 2,27,447 3,09,234 3,19,427 2,67,276 5,86,703 88,306 10,443 98,749 12,22,131

1.0. Total GST Revenues for FY 2019-20 came in at Rs 12,22,131 crores.

1.1. GST Revenues for the months of April, May and June 2020 are expected to be low due to the impact of
COVID-19. Revenues in these months could be well below the benchmark figure of Rs 100,000 crores.

Page. 3
► Notifications / Circulars / Orders:

The Notifications / Circulars / Orders issued during the month of April 2020 are as follows:

April - 2020
Area Notifications Circulars Orders ROD Orders

Central Tax 8 2 0 0
Central Tax (Rate) 0 0 0 0
Integrated Tax 1 0 0 0
Integrated Tax (Rate) 0 0 0 0
Union Territory Tax 1 0 0 0
Union Territory Tax (Rate) 0 0 0 0
Compensation Cess 0 0 0 0
Compensation Cess (Rate) 0 0 0 0

T otal 10 2 0 0

T otal 12
1.3. The numbers for the month of April, 2020.

GST Trivia

Q. Do you know the number of times the CGST Rules has been
amended since 1 st July, 2017?

A. [41] times.

❑ 2017 : 14

❑ 2018 : 14

❑ 2019 : 09

❑ 2020 : 04

► However, CBIC has been doing a good job in incorporating all

the amendments and hosting the updated rules on the portal.
The latest version is dated 3 rd April, 2020.

Page. 4
► Summary of Notifications/Circulars issued during April, 2020:

► Central Tax Notifications

Sl
Notification No Date Essence of the Notification
No
• Extension of timelines for opting the composition
scheme for the financial year 2020-21 to June 30, 2020
• In respect of the restriction of credit under Rule 36(4)
of the CGST Rules, 2017 (i.e. credit to the tune of
1 30/2020 03-04-2020
110% of the ITC matching as per 2A), the restricted
credit pertaining to the period of February 2020 to
August 2020 to be cumulatively adjusted with the
ITC for the month of September 2020
Reduces rate of interest / no interest on delayed filing of
returns in GSTR 3B for the tax period February, March
2 31/2020 03-04-2020
and April 2020 based on the aggregate turnover in the
preceding financial year subject to conditions
Waiver of late fees liable on late filing of GSTR 3B for
3 32/2020 03-04-2020 the tax period February, March and April 2020 if returns
filed by June 24, 2020
Waiver of late fees liable on late filing of GSTR 1 for the
4 33/2020 03-04-2020 tax period March, April and May 2020 and for quarter
ending March 30, 2020 if returns filed by June 30, 2020
• Extension provided for filing of GST CMP 8 for
quarter ending March 2020 and GSTR 4 for the year
5 34/2020 03-04-2020 ending March 31, 2020 upto July 7, 2020
• Extension for filing of GSTR 4 for financial year
ending March 31, 2020 till July 15, 2020
• Extension for completion of compliance viz.
proceedings, issuance of orders, notice, intimation,
appeal, reply, or any other application specified
thereunder, whose time limit falls between March 20,
6 35/2020 03-04-2020
2020 to June 29, 2020, upto June 30, 2020
• E-way bill whose validity expires during the period
March 20, 2020 to April 2020 shall be deemed to have
been extended till April 30, 2020
Extended time limit for filing of GSTR 3B for the tax
period May 2020 as follows:
• Aggregate Turnover of more than Rs 5 Crores in the
7 36/2020 03-04-2020
preceding FY – June 27, 2020
• Aggregate Turnover of upto Rs 5 Crores in the
preceding FY - State-wise limits specified
Seeks to enable the transfer of any amount of tax,
interest, penalty, fee, or others available under one
8 37/2020 28-04-2020
(major or minor) head to another (major or minor) head
in the Electronic Cash Ledger

Page. 5
► Integrated Tax Notifications

Sl
Notification No Date Essence of the Notification
No

Seeks to provide relief by conditional lowering of

1 03/2020 08-04-2020 interest rate for tax periods of February, 2020 to April,
2020

► Union Territory Tax Notifications

Sl
Notification No Date Essence of the Notification
No

Seeks to provide relief by conditional lowering of

1 01/2020 08-04-2020 interest rate for tax periods of February, 2020 to April,
2020.

► Circulars

Sl
Circular No Date Essence of the Circular
No
Clarification in respect of various measures announced
by the Government for providing relief to the
1 136/6/2020 03-04-2020 taxpayers in view of spread of Novel Corona Virus
(COVID-19)- Clarifications issued on Notifications
issued on 03-04-2020.
Clarification in respect of challenges faced by
2 137/7/2020 13-04-2020 registered persons in implementation of provisions of
GST- Advances, LUTs and Refunds.

Page. 6
► Analysis of important Notifications:
► Notification 30/2020 – Central Tax, dated April 3, 2020
This analysis is in continuation to our article
vide our newsletter- GST TIMES published
for the month of March 2020, interalia on the
belligerent amendment to Rule 36 of the
Central Goods and Services Tax Rules, 2017
by way of an insertion of sub rule (4).
Pertinently, the said rule has been subject to
multiple modifications hitherto, the most
recent one owing to the novel corona virus
pandemic in an apparent effort to ease the
taxpayers’ compliances.
Notably, a new proviso to the aforesaid rule
vide Notification 30/2017 – Central Tax dated
3, April 2020 (the ‘Notification’) has been
inserted in wake of the powers issued to the
Central Government by virtue of Section
168A of the Central Goods and Services Tax
Act, 2017. Let us analyze the same in detail:
❑ The Proviso
Extract of the Notification,
“Provided that the said condition shall apply
cumulatively for the period February, March,
April, May, June, July and August, 2020 and the
return in FORM GSTR-3B for the tax period
September, 2020 shall be furnished with the
cumulative adjustment of input tax credit for the
said months in accordance with the condition
above”
❑ The Analysis
To reiterate, the existing provision of Rule
36(4), technically, upto the tax period of
February 2020 allows a tax payer to avail
credits to a maximum extent of 110% of the
explicitly matched credits ie, those appearing
in 2A.
However, vide the instant Notification, the
Government has endeavored to ease the
burden of reconciliation and mapping of
credits for the tax period of February 2020 to
August 2020 by deferring the applicability of
the said rule and therefore the requirement of
credit reconciliation, between the purchase -
register and the 2A, to the tax period of
September 2020.
In other words, the taxpayer need not
undertake the pain of a monthly reconciliation
for the seven-month window and only
undertake a cumulative reconciliation for the
abovementioned tax periods in the month of
September 2020 itself.
❑ Manner of availing credits
▪ February 2020
At this juncture, firstly, a seemingly valid
question with respect to the objective of
extending this benefit to the month of
February 2020 arises. Cogently, a reasonable
understanding suggests that most taxpayers
may have already filed their returns within
the stipulated time frame i.e. March 20, 2020
and therefore, this benefit would interalia
affect those tax payers who have not adhered
to the compliance timelines. Therefore, any
taxpayer who has failed to file the GSTR 3B
until April 3, 2020 may now opt for this
staggered benefit and assume 100% credits
appearing in the purchase register for the
month of February 2020 and subject to
adjustment of the same along with returns of
September 2020.
Another most seemingly significant objective
is for those taxpayers who have filed their
GSTR 3Bs for the month of February 2020 in
time who may now be eligible to take the
remaining unclaimed credit ie, the remaining
unclaimed unmatched credits that weren’t
availed hitherto, while filing returns for the
month of March 2020 in coherence with the
deferred dates for filing such returns.
Page. 7
❑ March 2020 to August 2020

For the Months of March 2020 to August 2020, the taxpayer can avail 100 percent of the credits
appearing in the purchase register for the said respective months, irrespective of the same
matching with the transactions in the 2A report.

In the month of October 2020, while filing the GSTR 3B for September 2020, the tax payer would be
required to adjust all those credits not appearing in 2A, subject to the provisions of Rule 36(4),
cumulatively for all the months namely, February 2020 to August 2020 with the credits available to
the tax payer in the month of September 2020 or any excess dues which may require payment in
cash.

▪ Illustration

Credit Percentage Credit

Credit
appearing in of match actually Credit Lower or
Tax appearing
Purchase between PR eligible in availed for (Excess)
period in GSTR-
Register and 2A (in wake of Rule the month Claimed
2A
(PR) %) 36(4)
(1) (2) (3) (4) (5)* (6) (7)
February 2,00,000 1,80,000 90 1,98,000 1,98,000** -
March 3,60,000 2,90,000 81 3,19,000 3,62,000*** (43,000)
April 4,50,000 5,20,000 98 4,50,000 4,50,000 -
May 4,85,000 4,70,000 97 4,85,000 4,85,000 -
June 5,30,000 5,35,000 99 5,30,000 5,30,000 -
July 3,70,000 2,85,000 77 3,13,500 3,70,000 (56,500)
August 6,40,000 5,80,000 91 6,40,000 6,40,000 -
Total credits claimed (excess) (99,500)
Illustratively, total credit mapped upto the month of September 2020 and eligible
subject to the provisions of Rule 36(4) for availment 85,000

September 8,00,000 7,80,000 98 8,00,000 7,85,500****

* - 110% of credits matched in 2A where the percentage of matched value is 90%; or

- where credit match is above 90% avail full value as in PR.
** 110 percent of matched credits in 2A (ie, 1,80,000*110%) assuming returns have been filed in
time (before insertion of the abovementioned proviso)
*** Assuming that the unclaimed credit of Rs 2000 (2,00,000 - 1,98,000) pertaining to the tax
period February 2020 is also availed

**** Eligible credit subject to Rule 36(4) ie, (8,00,000 – 99,500 + 85,000)

Page. 8
 ❑ Our deductions

In wake of the above stated:

The taxpayer has been afforded with the benefit of deferred reconciliation/credit mapping, while
being allowed early availment of unmatched credits;

While this may appear as a welcome move for most tax payers, it brings about its own perils in
relation to compliances including heaped reconciliations.

Significantly, this would attract heavy implications and affect tax payers who lack credit
repositories.

Given that most tax payers would by now be acquainted to the process of credit mapping, a
prudent approach would be to assume monthly credits in line with Rule 36(4) to avoid credit
oddities and cash crunches during the month of October 2020 at the 11th hour.

► Notification 31/2020 – Central Tax, dated April 3, 2020 (r/w Notification 32/2020 –
Central Tax, dated April 3, 2020) - Deferment in filing Returns

In wake of the powers issued to the Central Government by virtue of Section 168A of the Central
Goods and Services Tax Act, 2017, the government has issued yet another, what seems like a
beneficial notification for the taxpayers in wake of the COVID 19 pandemic.

Among various such Notifications published in the official gazette, Notification 31/2020 – Central
Tax dated April 3, 2020 (hereinafter ‘the Notification’) renders a deferment or as it may be called
an ‘extension’ to the due date established for the filing of GSTR 3B for months specified
thereunder.

▪ What the Notification prescribes

Vide the recently issued Notification, a new proviso has been inserted to Notification 13/2017 –
Central Tax dated June 28, 2017 specifying the rate of interest on delayed filing of returns in GSTR
3B for the months of February, March, April 2020 as may be applicable. The same has been
enunciated in the tables below.

A. Aggregate Turnover more than 5 crores in the preceding financial year

Sl. Category of Taxpayer Tax Period Rate of Interest Conditions to be

No. satisfied
1. Taxpayers having an February 2020, Nil for first 15 days If return in FORM GSTR-
aggregate turnover of March 2020, from the due date, 3B is furnished on or before
more than rupees 5 April 2020 and 9% thereafter the 24th day of June, 2020
crores in the preceding
financial year

Page. 9
▪ How this benefits the taxpayer?

An interest free extension of 15 days for each of the three months respectively; and
Lower rate of interest at 9% post 15 days from the initial actual due date upto the June 24, 2020.

▪ What this means for the taxpayer?

Taxpayers whose aggregate turnover exceeds rupees 5 crores in the preceding financial year
may file delayed GSTR 3B for the months February, March and April 2020.

This benefit comes with a reduced cost of 9% interest (in lieu of the regular interest rate of 18%)
from the expiry of 15 days after the actual due date of filing returns for that period.

The primary condition here being, that the reduced rate of 9% would only be available if the
return for the said tax periods are filed by June 24, 2020 and not otherwise. This means if the
GSTR 3B for the said periods are filed after June 24, 2020, normal rate of interest i.e., 18% would
be applicable from initial due dates along with applicable late fees and penalty. This has
further been clarified vide Circular 136/06/2020-GST in serial number 3.

Illustratively, the actual due date of filing the GSTR 3B for the month of March 2020 falls on
April 2020. However, in wake of the notification, the tax payer may file the returns for the
month of March 2020 by May 5, 2020 (i.e. 15 days buffer) interest free. From May 6, 2020
onwards, a reduced interest of 9% would be applicable upto the date of filing of returns for a
maximum period upto June 24, 2020.

Let us take a few more examples for better understanding, say, for the month of March 2020
and April 2020 respectively:

Due date of 15 days buffer Interest

Return filed on Interest period
filing return end on applicable (p.a)
April 20, 2020 May 5, 2020 May 5, 2020 9% NA
April 20, 2020 May 5, 2020 May 9, 2020 9% 4 days
April 20, 2020 May 5, 2020 June 30, 2020 18 % 71 days
May 20, 2020 June 4, 2020 June 4, 2020 9% NA
May 20, 2020 June 4, 2020 June 24, 2020 9% NA
May 20, 2020 June 4, 2020 June 30, 2020 18 % 41 days

1.4.*This would be applicable in the same manner for the respective tax periods February, March and April 2020.

Page. 10
B. Aggregate Turnover more than 1.5 crores but upto Rs 5 crores in the preceding financial year

Category of taxpayer Tax Period Rate of Interest Conditions to be satisfied

Taxpayers having an If return in FORM GSTR-3B

aggregate turnover of February 2020, Nil is furnished on or before the
more than rupees 1.5 March 2020 29th day of June, 2020
crores but upto Rs 5
crores in the preceding
financial year If return in FORM GSTR-3B
April 2020 Nil is furnished on or before the
30th day of June, 2020

▪ How this benefits the taxpayer?

• Interest free deferred filing of GSTR 3B for the tax period February 2020 and March 2020
but upto June 29, 2020;
• Interest free deferred filing of GSTR 3B for the tax period April 2020 but upto June 30, 2020.

▪ What this means for the taxpayer?

In contrary to the analogy prescribed in table A, for tax payers falling under this category i.e.,
between the aggregate turnover of more than 1.5 crores but upto Rs 5 crores in the PFY, there
would be only one due date for February and March 2020 i.e., June 29, 2020 and for April 2020
would be June 30, 2020 with no interest applicable.

• It would be relevant to note that the benefit of reduced rate of interest would not be applicable to this
category where the GSTR 3B is filed beyond the stipulated dates and any delay beyond the above
mention dates would attract normal rate of interest along with late fees and applicable penalty from
the actual due dates viz. 21st day of the following month respectively. (refer * Notes below)

C. Aggregate Turnover of upto 1.5 crores in the preceding financial year

Category of Taxpayer Tax Period Rate of Interest Conditions to be satisfied

Taxpayers having an If return in FORM GSTR-3B is

aggregate turnover upto February 2020 Nil furnished on or before the 30th day
Rs 1.5 crores in the of June, 2020
preceding financial year
If return in FORM GSTR-3B is
March 2020 Nil furnished on or before the 3rd day of
July, 2020
If return in FORM GSTR-3B is
April 2020 Nil furnished on or before the 6th day of
July, 2020

Page. 11
▪ How this benefits the taxpayer?

• Interest free deferred filing of GSTR 3B for the tax period February 2020 only upto June 30,
2020; and
• Interest free deferred filing of GSTR 3B for the tax period March 2020 only upto July 3, 2020;
and
• Interest free deferred filing of GSTR 3B for the tax period April 2020 only upto July 6, 2020

▪ What this means for the taxpayer?

• For taxpayers falling under the said turnover category interest free deferred dates are as
follows:
- February 2020 – June 30, 2020
- March 2020 – July 3, 2020
- April 2020 – July 6, 2020

• It would be relevant to note that the benefit of reduced rate of interest would not be applicable to
this category beyond the stipulated dates and any delay beyond the above mention dates would
attract normal rate of interest along with late fees and applicable penalty from the actual due dates
being 21st day of the following month respectively. This has further been clarified vide Circular
136/06/2020-GST in serial no 5. (refer * Notes below)

* Notes:
• Appositely, the late fee for the tax period February 2020, March 2020 and April 2020 would also be
waived in all the above cases namely, (A), (B) and (C) provided that the return has been filed within
the prescribed deferred time limit. In a scenario otherwise, i.e. where the tax payer fails to file the
return within the deferred due date, the late fee and applicable penalty shall be levied from the initial
applicable due dates i.e., 21st day of the month following the tax period upto the date of filing.

• In the interest of the taxpayer, by virtue of the recent amendment to Section 50 of the CGST Act,
2017, it is amply clear that the liability to interest on delayed payment would be computed on net
basis. That is to say, the liability towards interest would be calculated after deducting the available
input tax credits from gross tax liability.

Page. 12
►Analysis of Decisions:

In case of cited judicial precedents , GST Times has sourced the case laws from
www.taxmanagementindia.com. As on 30 th April, 2020, the website has reported 3,054 case
laws under GST.

Level No. of Cases

AAAR 142
Appellate 6
Authority for Advance Rulings 1,046
Commission 2
District Court 10
High Court 1,689
National Anti-Profiteering Authority 130
SC Orders 23
Supreme Court 6
T otal 3,054
1.5. GST Times has analysed the case laws reported in www.taxmanagementindia.com

▪ Readers may be perplexed on how the District Courts can hear cases and give rulings under
GST. Well, the answer is that all the 10 decisions have been given by the Patiala House Court
for offences committed under GST laws. Commonly, these decisions involve hearing requests
for bail. There is an interesting decision in the case of Rajesh Sharma against a professional
accountant who claimed that he was falsely implicated and arrested. Extract from the decision
is reproduced below:

2019 (8) TMI 577

PATIALA HOUSE COURTS GST v. GIRISH SHARMA

Bail application of professional accountant - whether the accused has been falsely implicated in
the present case and that he was only furnishing the GST returns on behalf of the firms which
are allegedly involved in the commission of alleged offence –

Held :- In the case in hand, the applicant/accused is allegedly involved in the commission of
alleged offence and the evidence collected by the department during the investigation also
reveals the involvement of the accused in the commission of alleged offence. As per the
allegations the applicant/accused used to create fake firms and he used to fraudulently file tax
returns to avail input tax credit (ITC).

During the investigation, various firms were found to have been created by the accused in
order to commit the alleged offence and to fraudulently claim the input tax credit (ITC).

Considering the facts and circumstances, nature of allegations, amount of ITC involved in the
present case and the initial stage of investigation, I am not inclined to grant bail to the
applicant/accused Girish Sharma at this stage - bail application dismissed.

Page. 13
► Reported Case Laws:
Case Law / Citation
2020 (4) TMI 872
In Re: M/s. Solize India
Technologies Private Limited
2020 (4) TMI 666
Mahadeo Constructions Co. v.
UOI & Ors.
2020 (4) TMI 667
In Re: M/s. Siemens Limited
2020 (4) TMI 228
In Re : M/s. Clay Craft India
Pvt. Ltd.
2020 (4) TMI 693
In Re: M/s. T & D Electricals
2020 (4) TMI 665
Rajinder Bassi & Ors. V. State
of Punjab
Issue
Classification of Supply
Whether supply of Computer
Software amounts to Supply of
goods or not?
Whether interest can be
determined without initiating
any adjudication process either
u/s 73 or 74 of the CGST Act in
the event of an assesses raising
dispute towards liability of
interest?
Whether entering into separate
contracts for supply of goods
and supply of services with the
same client would amount to
composite supply or not?
Levy of GST under Reverse Yes, Salary to Director of a company
charge mechanism towards will attract GST under Reverse
salary paid to Director of a charge mechanism.
company as per the contract
who is also a part time director
in another company.
Requirement of separate
registration for execution of
contract in a different state.
Grant of interim bail on the
prevalent condition of spread
of COVID-19 Virus - evasion
of payment of GST u/s 132 of
CGST Act, 2017.
Decision
Since the software is pre- designed
and pre- developed and enforced
with encryption keys and not
designed for any specific client. It
satisfies all the requisites under the
definition of ‘Goods’. Hence the
supply made by the applicant is
covered under “supply of goods”.
Yes. A Notice has to be mandatorily
served to the assessee u/s 73 for
unpaid or short paid tax by the
Assessing/Proper officer.
Though the contracts are for different
purposes. They are still looked at as
one whole contract and each of these
contracts are interdependent on each
other. Order passed by the Advance
Ruling upheld.
It is still under consideration and no
ruling is provided to this query. As
the impugned question does not get
covered under the issues on which
Advance ruling can be sought u/s 97
(2) of CGST Act, 2017.
Application dismissed
Page. 14
► GST Alerts and Updates:

► GST PMT-09

Where a law implements any taxes and its
associated liabilities, it is apparent that a
mechanism for payment of such liabilities will
follow. The provisions for payment of GST
related taxes, interest, fees and penalty etc.,
are laid down under Section 49 of the Central
Goods and Services Tax Act, 2017 (hereinafter
‘the CGST Act’). The said section explicitly
provides that the electronic cash ledger may
be used for making payment towards tax,
interest, penalty, fees or any other applicable
amount.
Practically, the payment of taxes into the
electronic cash ledger has been mechanised
under various heads or categories namely,
IGST, CGST, SGST, UTGST, Compensation
Cess, each with its sub-categories for tax,
interest, penalty, fee, etc. While making
remittances into the electronic cash ledger, the
taxpayer is required to appropriately select
the head or category under which such
payment is being made. For instance, where
the taxpayer intends to remit the payment for
CGST taxes, the option of CGST tax is to be
selected, further, where interest of CGST is to
be remitted, the option of CGST and interest
would be opted, so on and so forth.
However, it may so happen that the taxpayer
inadvertently makes a payment of CGST
Interest instead of CGST tax. Technically,
until April 2020, in the case of such
unintentional errors, the taxpayer could not
make any electronic adjustments of such
payment against any other head of payment,
leaving the taxpayer with the only option of
future adjustments against such head or
claiming the said amount as refund
warranting an additional payment of the same
amount into the correct head.
This leaves the taxpayer with the following
two alternatives and an additional payment of
Rs 100 towards the actual CGST tax liability:
• Use the payment in interest head for future
interest liabilities; or
• Claim a refund of Rs 100.
While, by the looks of it, the above
alternatives may seem fairly simple, most
taxpayers would agree that the whole extra
effort not only adds to the woes of the
taxpayer, in case of the first alternative, who
has to now not only make an additional
payment of the correct tax but also wait for a
corresponding future liability to arise (in our
example interest liability). Further, in case of
the second alternative, the taxpayer would be
compelled to undertake the perils of seeking
refund from the government which is a
lengthy and a tedious process.
To finally mollify the difficulties of the
taxpayer, the government after various
deliberations and ambiguous insertions in law
over a considerable period of time, decided to
bring into effect a mechanism for transfer of
balances in the electronic cash ledger from a
minor or major head to another major or
minor head.

For example, a taxpayer intends to remit a

payment of Rs 100 towards CGST tax liability
but unintentionally remits the payment
towards CGST interest.

Page. 15
 Where, Major head - Integrated tax, Central tax, State/UT tax, and Cess.
Minor heads - Tax, Interest, Penalty, Fee and Others.

1.6. The timeline of developments

To enable the transfer of any amount of tax,
interest, penalty, fee, or others available
under one (major or minor) head to another
(major or minor) head in the Electronic
Cash Ledger the government has
introduced a mechanism vide Form GST
PMT 09.
▪ What is GST PMT 09?
▪ How does GST PMT 09 work?
This facility can be used to transfer any
amount available in Electronic Cash Ledger
as given below:
• To transfer amount from minor head tax
under major head cess to minor head
interest under major head CGST; or

PMT 09 enables any registered taxpayer to • To transfer amount from minor head
perform intra-head or inter-head transfer of Interest under major head IGST to minor
amount as available in Electronic Cash head Tax under same major head IGST.
Ledger.

Page. 16
When does Form GST PMT go live from?
• This function is effective from April 21, 2020
How do I source GST PMT 09?
• To undertake the transfer of balances in the
electronic cash ledger:
• Navigate to Services > Ledgers > Electronic
Cash Ledger > File GST PMT-09 For Transfer
of Amount option.
How many heads can be selected while filing
Form GST PMT 09?
• Multiple heads can be selected for transfer of
balances, one at a time by selecting “Add
Record” before proceeding to file.
Does the taxpayer need to sign Form GST PMT
09?
• The taxpayer can file Form GST PMT-09
using DSC or EVC
What happens once the tax payers files Form
GST PMT 09?
• ARN is generated on successful filing of
Form GST PMT-09.
• An SMS and an email is sent to the taxpayer
on his registered mobile and email ID.
• Electronic Cash ledger will get updated after
successful filing of Form GST PMT-09.
• Filed form GST PMT-09 will be available for
view/download in PDF format.
How can the taxpayer view Form GST PMT 9
upon filing?
• Navigate to Services > Ledgers > Electronic
Cash Ledger > View Filed GST PMT-
09 option.
How can the taxpayer view Form GST PMT 9
upon filing?
• Navigate to Services > Ledgers > Electronic
Cash Ledger > View Filed GST PMT-
09 > Download PMT – 09 (PDF) option.
Can Form GST PMT 9 be rectified?
• In the absence of any specific restriction in
doing so, it is apparent that the GST PMT
09 can be rectified. This can be undertaken
by filing another GST PMT 09
incorporating the rectification. However,
it is to be noted that rectification may be
allowed only until such balances appear in
the electronic cash ledger, that is to say,
any utilised amount flowing out of the
electronic cash ledger cannot be altered.
Relevant links:
• CBIC Manual for GST PMT 09:
https://tutorial.gst.gov.in/userguide/ledgers/index.
htm#t=Manual_pmt09.htm
• CBIC FAQ’s:
https://tutorial.gst.gov.in/userguide/ledgers/index.
htm#t=faq_pmt09.htm
Page. 17

► Our Monthly Article:
► Directors Remuneration in wake of the
recent AAR
Taxability of ‘Directors remuneration’ has
always been a grey area and a subject matter of
dispute from the very inception more so in
respect of the reverse charge mechanism in
2012 vide Notification No. 30/2012-ST dated
June 20, 2012. Pertinently, the said ambiguity
has lingered into the GST regime as well
through similar provisions.
To add to the already existing anomalies, the
recent Advance Ruling in case of M/s Clay
Craft India Private Limited has qualified
director’s remuneration as a consideration to
supply in the nature of a reverse charge service
under the above mentioned Notification,
without taking into consideration the
applicant’s contentions. A brief summary of
the ruling is as follows:
❑ Facts of the case
The applicant is engaged in the manufacture of
bone China Crockery, Transfer Sheet
Decalcomania, other Utensils Item and Molds &
Die falling under chapter heading No.
69111011, 49081000, 84801000 & 84801000 of the
Tariff.
The applicant houses 6 directors in its Board of
Directors who are performing all the duties and
responsibilities and duties as required under
the laws;
The said directors, at different levels of
management, hold charge of procurement of
raw material, production, quality checks,
dispatch, accounting etc. In other words, the
directors are deployed as employees of the
company against regular salary and other
allowances as per the company policy and as
per their employment contract;
Further, these Directors are treated at par with
any other employee of the company as far as
their employment is concerned. While the
company deducts TDS on their salary, PF laws
are also applicable to their service.
Therefore, for all practical purposes these
directors are the employees of the company
and are working as such besides being
Director of the company;
❑ Questions before the Rajasthan AAR for
which the ruling is sought
▪ Whether GST is payable under Reverse
Charge Mechanism (RCM) on the salary
paid to Directors of the company as per the
employment contract?
▪ Whether the situation would change from
(a) above if the Director also is a part time
Director in other company also?
❑ Observation and Ruling
The consideration in wake of Section 2(31) of
the CGST Act, 2017, paid to the Director for
the supply of services to the Company is
specifically covered under Notification No. 13
/2017- Central Tax (Rate) dated 28.06.2017
and therefore the tax shall be paid on reverse
charge basis by the applicant;
In wake of the above, the consideration paid
to the Directors is against the supply of
services provided by them to the applicant
and are not covered under clause (1) of the
Schedule Ill to the CGST Act, 2017 as the
Directors are not the employee of the
Company. In the instant case Director is the
supplier of services and the applicant
company is the recipient of the services.
Therefore, the services rendered by the
Director to the company for which
consideration is paid to them in any head is
liable to pay GST under RCM.
Our considerations on the Ruling
• The AAR, Rajasthan has grossly erred in
failing to consider the applicants contentions
and have failed on contest the contentions laid
by the applicant;
• The fairly common position of an employer-
employee relationship between the directors
and the company especially in the presence of
an employment contract has failed to amuse
the AAR
Page. 18
❖ Taxability under the erstwhile regime:
Taxability of director’s remuneration has always
been a subject matter of speculation including
the erstwhile regime. This issue roots from a
difference in taxability under the reverse charge
mechanism prevailing at the time versus the
question of the employer-employee relationship.
A significant point of reference which proved a
forerunner under the pre-GST regime for
taxability of payments to directors was the
eminent Circular 115/09/2009 – ST dated July 31,
2009.
➢ What does the Circular say?
• Certain payments made by companies as a
‘commission’ to their Managing
Director/Directors (Whole-time or
Independent ) even if termed as commission,
is not the ‘commission' that is within the
scope of business auxiliary service and hence
service tax would not be leviable on such
amount.;
• The Managing Director / Directors (Whole-
time or Independent) being part of Board of
Directors perform management function and
they do not perform consultancy or advisory
function. The definition of management
consultant service makes it clear that what is
envisaged from a consultant is advisory
service and not the actual performance of the
management function.
• The payments made by Companies, to
Directors cannot be termed as payments for
providing management consultancy service.
Therefore, it was clarified that the amount
paid to Directors (Whole-time or
Independent) would not be chargeable to
service tax under the category 'Management
Consultancy service'. However, in case such
directors provide any advice or consultancy
to the company, for which they are being
compensated separately, such service would
become chargeable to service tax.
In view of the above, it had been clarified
that remunerations paid to Managing
Director / Directors of companies whether
whole-time or independent when being
compensated for their performance as
Managing Director/Directors would not be
liable to service tax.
Notwithstanding the above and in wake of
several judicial precedents in this regard,
the ambiguity of appropriate taxability on
undertakings of the director ie, taking into
consideration the employer-employee
relationship versus the reverse charge
applicability on services by directors, while
addressed to a certain extent, remained
debatable till the culmination of the
erstwhile regime.
❖ Applicability of GST on payments to
directors:
▪ Plausible treatment under GST
The treatment of director payments under
the GST regime could be evaluated under
two plausible categories:
o Service Supplied by Director to the Company
RCM liability
As per Section 9(3) of the CGST Act 2017,
certain specified supplies (services) have
been notified, the liability for payment of
tax on which, would be in the hands of the
service recipient as against the standard
onus being on the service. This practice
under the erstwhile as well as the GST
regime is popularly termed as the reverse
charge mechanism.
The said supplies have been enlisted in
Notification 13/2017 – Central Tax (Rate)
dated June 28, 2017 wherein one such
supply under Entry 6 is ‘Service supplied by
a director of a company or body corporate
to the said company or the body corporate”
Page. 19
o Activity under an employment contract

• Schedule III enlists certain transactions which would neither be treated as a supply of goods
nor a supply of service under the GST regime.

• By virtue of Clause 1 of Schedule III, any service by an employee the employer in course of the
said employment would not be treated as a supply of services

o In wake of the above said, ensuing are the points of equivocation in respect to the qualification
of director’s remuneration that arise:

• A payment in course of employment with the company in wake of Clause 1 of Schedule III to
the CGST Act, 2017; or

• A service rendered to the company by such director under the reverse charge notification
13/2017 – Central Tax (Rate) dated June 28, 2017.

▪ Does a director qualify as an ‘employee’ under the GST Act?

• Presently, the GST regime does not explicitly afford a specific definition or meaning to the
term ‘employee’ or ‘director’. In such a case, to understand the term ‘employee’ or ‘director’ in
a rather general sense, one seek direction from the definitions under other relevant laws:

• For instance, as per the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
defines the term ‘Employee’ as

“Any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with
the work of an establishment, and who gets his wages directly or indirectly from the employer and includes
any person,

(i) Employed by or through a contractor in or in connection with the work of the establishment;

(ii) Engaged as an apprentice, not being an apprentice engaged under the Apprentice Act, 1961 (52) of
1961) or under the standing orders of the establishment]; ”

Page. 20
▪ Further, various classes of the term ‘director’ have been specifically defined under the Companies
Act, 2013 as follows:

Section Term Definition

2(34) Director means a director appointed to the Board of a company

2(47) Independent Director means an independent director referred to in sub-section (6) of

section 149;
means a director who is in any way, whether by himself or
2(49) Interested Director through any of his relatives or firm, body corporate or other
association of individuals in which he or any of his relatives is a
partner, director or a member, interested in a contract or
arrangement, or proposed contract or arrangement, entered into
or to be entered into by or on behalf of a company
means a director who, by virtue of the articles of a company or an
2(54) Managing Director agreement with the company or a resolution passed in its general
meeting, or by its Board of Directors, is entrusted with
substantial powers of management of the affairs of the company
and includes a director occupying the position of managing
director, by whatever name called.
2(94) Whole Time Director includes a director in the whole-time employment of the company

▪ By and large, directors may be categorized into two plausible classes:

Page. 21
▪ Supporting, the significance of office of the
managing director in dual capacity i.e.,
director and employee, has been relayed in
detail in the case of Employees State
Insurance Corporation v M/S. Apex
Engineering Private Limited wherein the
primary principle emphasized by the
Honorable Apex Court being the scope of
responsibilities burdened on the managing
director who is actively engaged in the day
to day affairs of the company .
▪ Furthermore, Rule 12 of the Companies
(Share Capital and Debentures) Rules, 2014
for the purpose of Section 62(1)(b) of the
Companies Act, 2013 defines employee for
the purpose of ESOP as under:
• ‘‘Employee’’ means-
(a) a permanent employee of the company who has
been working in India or outside India; or
(b) a director of the company, whether a
whole-time director or not but excluding an
independent director; or
(c) an employee as defined in clauses (a) or (b) of a
subsidiary, in India or outside India, or of a
holding company of the company but does not
include-
(i) an employee who is a promoter or a person
belonging to the promoter group; or
(ii) a director who either himself or through his
relative or through anybody corporate,
directly or indirectly, holds more than ten
percent of the outstanding equity shares of the
company.”
▪ From a conjoint and coherent reading of the
above it could be reasonably stated that a
director who undertakes and engages in
day to day affairs of the company and is
engaged under a contract of employment
by the company, specifically the ‘executive’
directors, would deem to be ‘employees’ of
the company.
▪ Pertinently, basis the aforementioned, it
could be rationally interpreted that an
executive director undertaking day to
day affairs of the company would
qualify as an ‘employee’ for the purpose
of the GST law as well.
▪ What services rendered by the directors
would be encompassed in the scope of
reverse charge under Notification
13/2017?
• While the GST law does not explicitly
address this question, it is apparent that
the services rendered by directors in their
professional capacity would be subject to
GST on reverse charge basis under the
said Notification
• In other words, all those services
undertaken by the director which is
outside the scope of ‘employer-employee’
relationship established between the
director and the company through an
employment agreement and services
rendered in their professional capacity
would be liable to GST under RCM.
▪ What services rendered by the directors
would be encompassed under Schedule
III Clause 1?
• In the absence of specific provisions
under the GST law to this effect, all those
activities undertaken by the director
which are pre-established under an
employment contract between such
director and the company and are outside
of the director’s professional capacity
would deem qualification under the
employer-employee relationship and
therefore outside the leviability of GST.
Page. 22
❖ Significant judicial precedents

➢ Authority for Advance Ruling (Karnataka) - in re: M/s. Alcon Consulting Engineers (India)
Private Limited

▪ Question before the AAR

• Whether directors remuneration as a supply of services is liable to tax under reverse charge
mechanism?

▪ Held that

• The services provided by Directors to the Company are not covered under clause (1) of the
Schedule III to the Central Goods and Services Tax Act, 2017 as the Director is not the employee
of the Company. The consideration paid to the Director is in relation to the services provided by
the Director to the Company and the recipient of such service is the Company as per clause (93)
of section 2 of the CGST Act and the supplier of such service is the Director.

• In the present case, the applicant is the company and is located in the taxable territory and the
Directors’ remuneration is paid for the services supplied by the Director to the applicant
company and hence the same is liable to tax under reverse charge basis under section 9(3) of the
Central Goods and Services Tax Act, 2017.

❑ Managing Directors are employees of the Company

➢ Regional Director, E.S.I. vs Sarathi Lines (P) Limited and Ram Pershad v Commissioner Of
Income-Tax, [(1998) ILLJ 28 1972 1973; AIR 637, 1973 SCR (3) 985]

▪ Held that

• Managing directors exercise their powers within the terms and limitations prescribed thereunder
and subject to the control and supervision of the Directors which in our view is indicative of his
being employed as a servant of the company.

❑ Remuneration paid to directors is salary

➢ Allied Blenders and Distillers Private Limited v Commissioner of Central Excise & Service
Tax, Aurangabad [ST/87204/2017]

▪ Held that

• The Appellant have placed on record the Form-16 issued by the appellant indicating deduction
of income tax at source on the salary paid to each of the Directors. Besides, the appellant had also
produced the contribution made to the Employees Provident Fund for each of the Directors, as
required in case of other employees under the relevant Laws. Similarly, as per Form-32 which is
required to be filed under the Companies Act, with the Registrar of companies, the four directors
are shown as executive directors indicating that they are employees of the company.

Page. 23
❑ Two departments of the same government cannot adopt different stands

➢ M/s. Rent Works India Private Limited v Commissioner of Central Excise, Mumbai
[Appeal No. ST/145/12-Mum]

▪ Held That

• If an amount paid by the appellant to Shri Alan Van Niekerk is considered as salary by the
Income Tax Department, a branch of Ministry of Finance, Department of Revenue, it cannot be
held by the Service Tax Department, another branch of Ministry of Finance, Department of
Revenue, as amount paid for consultancy charges and taxable under Finance Act. The same
department of Government of India cannot take different stands on the amount paid to the very
same person and treat it differently. Therefore, the amount which is paid to Mr. Alan Van
Niekerk, has to be treated as salary to the director and the salary is not to be considered as to fall
under the category of “Management Consultancy Services”

❖ Conclusion:

Activity Condition GST Implication

• Activities to be undertaken under an • Activity is deemed to be
Services rendered in established employment agreement; provided in course of
the course of • Director to receive salary under such employment;
employment employment;
• Director to be eligible for applicable • No supply as per Schedule
employment benefits; III Clause 1;
• Employment compliances including
TDS etc. to be undertaken. • No GST implication
• Not in course of
employment as service is
Professional provided in professional
Services including NA capacity
sitting fees
• GST applicable on reverse
charge basis as per
Notification 13/2017
When borne in the capacity of
Reimbursement of a ‘pure agent’ – No GST liable.
NA
expenses

Not in course of employment

Any other services as service is provided in
such as consultancy NA professional capacity.
services etc. GST applicable on reverse
charge basis as per
Notification 13/2017

Page. 24
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