Q. 197 The department wants to charge the GST on 2.50% of the total loan exposure as a guarantee commission to directors. We want to execute an agreement for director remuneration where we want to bifurcate the director remuneration into two parts, one is director remuneration and another is a commission for guarantee. Can you have some draft agreement for the same?

Ans. As per para 2 of schedule I the supply of goods or services or both between two or more related persons without consideration made in the course of furtherance of business would be treated as supply. In the above case, directors are related persons and the service of providing personal guarantee would fall under the term ‘supply’, hence GST is to be leviable under reverse charge. If a personal guarantee is provided as per the terms of employment then it would be qualified under para 1 of schedule III and not be treated as supply then GST would not be leviable. Any supply other than business and commerce, not falling in the definition of business as defined in the CGST Act does not come under the ambit of GST. Hence, GST would not be levied on those supplies. This is a very subjective matter of litigation. It is also advised to take a detailed opinion to have better clarity.

Q. 196 We usually raise debit notes towards short supplies, rejections, and quality differences the value of the same is deducted from ITC and net value considering for set off. My question is instead of deducting from ITC shall we upload the debit note in GSTR-1?

Ans. Under GST law, form GSTR- 1 is the statement of reporting invoice-wise details of outward supplies of goods and services or both, in that statement debit notes or credit notes related to outward supplies are to be furnished in the return if the same is issued by the supplier only. The reporting of debit notes related to ITC is not allowed in Form GSTR-1 because it will not lead to input reversal and it will inflate the turnover of the company which is not permissible under GST law. 

Q. 195 A Gst registered composite scheme dealer sales of taxable and sales of exempted turnover both show in cmp-08 returns and annual returns compulsory For example: Doctor sales of medicines for pharmacy business rs:50 lacs Agriculture income rs:1,80,000/- Fees collections income rs 20 lacs Show in income tax returns. Question : Dealer above mentioned incomes all show in composite returns compulsory ?

Ans. As per rule 62 of the CGST Rules, the return furnished shall include details of (a) invoice wise inter-State and intra-State inward supplies received from registered and un-registered persons; and (b) consolidated details of outward supplies made. In the above case, all details of taxable as well as exempt supply are to be furnished in the return.