Dear Experts,
If a person residing in india get director remuneration (in USD) from a company in USA, in which he is a director (and not an employee), is it considered to be export of service.
Definition u/s 2(6) of IGST act has 5 condition for export of service, one of the condition is -
"the supplier and recipient of service should not be merely establishments of a distinct person"
Kindly reply considering this condition.
Thank you!
Export of Service in GST
Replies (2)
Quick Summary
1. Please check the status of the Director. You mentioned as it is not an employee. Then He / She seems to be Non-Executive or Independent Director.
2. In such an instance, there is no direct relation of director with the company. Director is then getting remuneration for services rendered to the company in his /her own Individual Professional capacity.
3. Question of bringing clause (v) of Section 2(6) of IGST Act does not arise, Please also read the explanation 1 of "Establishment of Distinct person " as given under section 8, which clarifies as to what constitute as Establishment of distinct person".
4. Need more clarification of what kind of service the Director is providing to decide upon the place of supply of service.
5. In general sense of transaction, it will be treated as Export of service with place of supply outside India.
Ankit Sir, thank you for such detailed reply !
1. With regards to status in USA Company, he is actually one of the founders. Also he looks after most of the company's core business.
Now you may ask why no employment agreement. Bcoz to become an employee under USA laws is a tedious thing. Many compliances are required. So instead they remain just directors and to draw money from the company (Inc), they just have to submit 1 form. (I cant recall the form number) and its done.
2. Yes we can say that its personal capacity
3. I have read the explanation on establishment of Distinct person, but couldn't understand it completely, especially wrt an Individual
4. Yes I can clarify this, His company is a sort of IT company and sells software across US and Europe. And yes, he is drawing money in name of "Consultancy Services". So I think this will be covered under general POS rule of sec 13(2) of IGST Act. - POS being location of recipient.
5. I agree
Pls share any more insights if you can, on above clarifications. And Thanks again for taking out time to address this issue.
1. With regards to status in USA Company, he is actually one of the founders. Also he looks after most of the company's core business.
Now you may ask why no employment agreement. Bcoz to become an employee under USA laws is a tedious thing. Many compliances are required. So instead they remain just directors and to draw money from the company (Inc), they just have to submit 1 form. (I cant recall the form number) and its done.
2. Yes we can say that its personal capacity
3. I have read the explanation on establishment of Distinct person, but couldn't understand it completely, especially wrt an Individual
4. Yes I can clarify this, His company is a sort of IT company and sells software across US and Europe. And yes, he is drawing money in name of "Consultancy Services". So I think this will be covered under general POS rule of sec 13(2) of IGST Act. - POS being location of recipient.
5. I agree
Pls share any more insights if you can, on above clarifications. And Thanks again for taking out time to address this issue.
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