Companies will not have to deduct GST under reverse charge mechanism (RCM) on services such as renting of immovable property provided by directors in his personal capacity, the finance ministry said on Tuesday.In a clarification issued after the GST Council meeting on July 11, the ministry said that only those services which are provided by directors in his official capacity to the company would attract GST under RCM.Under the RCM, entity receiving the services are required to deduct GST while making payments to the supplier.

In a circular, the ministry said it has received references requesting for clarification whether services supplied by a director of a company or body corporate in personal or private capacity, such as renting of immovable property to the company, are taxable under RCM or not.”It is clarified that services supplied by a director of a company or body corporate to the company or body corporate in his private or personal capacity such as services supplied by way of renting of immovable property to the company or body corporate are not taxable under RCM,” it said.

Only those services supplied by director of company, which are supplied by him as or in the capacity of director of that company shall be taxable under RCM in the hands of the company, the ministry added. AMRG & Associates Senior Partner Rajat Mohan said this is quite a restrictive clarification that has neither clarified ‘personal capacity’ nor ‘indicated an illustrative list of personal services provided by a director’.”Taxation of other director services like bank guarantee, advisory services, training services and planning services would continue to be a grey area for the industry unless CBIC gives unambiguous rules for categorization of ‘director services’,” Mohan said.

With regard to taxation of food and beverages supplied to people in cinema halls, the finance ministry said refreshments given as part of the ticket will be treated as composite supply and taxed at the rate applicable on movie tickets. Movie tickets below Rs 100 are taxed at 12 per cent, while those above the threshold attract an 18 per cent GST.However, if the refreshment is supplied standalone and not bundled with the ticket, then GST rate of 5 per cent, which is the same as restaurants, would be applicable.