These clarifications were recommended by the GST Council in its 50th meeting held on July 11, 2023.Circular No. 201/13/2023-GST addresses two issues which are as below:
Issue 1: Services Supplied by Directors
The first issue pertains to whether services supplied by directors of a company in their personal capacity, such as renting of immovable property to the company or body corporate, are subject to the Reverse Charge Mechanism (RCM). The circular clarifies the following:
- Tax on services supplied by directors of a company or body corporate to the said company or body corporate shall be paid by the company or body corporate under RCM. (Entry No. 6 of notification No. 13/2017 CTR dated 28.06.2017)
- However, services supplied by a director of a company or body corporate to the company or body corporate in their private or personal capacity, such as renting of immovable property, are not taxable under RCM.
- Only services supplied by directors of a company or body corporate in their capacity as directors of that company or body corporate shall be taxable under RCM.
Issue 2: Supply of Food or Beverages in Cinema Halls
The second issue concerns the taxability of the supply of food or beverages in cinema halls as a restaurant service. The circular provides the following clarifications:
- “Restaurant Service” includes the supply of food or any other article for human consumption or any drink, provided by a restaurant, eating joint, mess, canteen, whether for consumption on or away from the premises. (As per the explanation in notification No. 11/2017-CTR dated 28.06.2017)
- The term “eating joint” encompasses refreshment or eating stalls, kiosks, counters, or restaurants at a cinema.
- The cinema operator may run this refreshment or eating stalls themselves or contract them to a third party.
- The supply of food or beverages in a cinema hall is taxable as a “restaurant service” as long as it is supplied by way of or as part of a service and is independent of the cinema exhibition service.
- If the sale of cinema tickets and the supply of food and beverages are bundled together and satisfy the criteria of a composite supply, the entire supply will attract GST at the rate applicable to the service of exhibition of cinema, which is the principal supply.
Conclusion
It confirms that services supplied by directors in their personal capacity, such as renting of immovable property, are not subject to the Reverse Charge Mechanism. Additionally, it clarifies that the supply of food or beverages in cinema halls is taxable as a restaurant service, as long as it is provided independently of the cinema exhibition service.
This Article is only a knowledge-sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event RMPS & Co. or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update etc. if any.
