The Authority for Advance Rulings (AAR), Karnataka bench has recently held that the salary of a director is not subject to Goods and Services Tax (GST).
While delivering a significant ruling, the authority observed that the same is not a service.
Facts of the case:
The applicant, M/s Anil Kumar Agarwal is an unregistered person and is in receipt of various types of income or revenue such as partner’s salary, salary as director from Private Limited company, the LIC Policy maturity amount, etc.
Interpretation of law and Conclusion:
The bench headed by Ravi Prasad M.P. and Mashhood Ur Rehman Farooqui held that “the impugned income would be received on maturity of the insurance policies i.e. on the closure of the insurance contract consequent on the maturity of the said policies.
The insurance premium of policies is taxable under GST, being the consideration for the services provided by the insurance companies. Therefore, on completion of the said contract/maturity of the policy, there would not be any service involved between the policyholder and the insurance company,”
“Therefore, the amounts received on maturity of the insurance policies are not relevant to the aggregate turnover and, hence, are not required to be added to the aggregate turnover for registration under the provisions of the GST Act,” the ruling said.
The ruling would be a great relief to taxpayers. However, LIC premiums are still subject to GST. Considering the difficulties facing by the policyholders as well as agents, the Members of the All India Life Insurance Corporation Agent’s Forum, MandyaPradhesh, in Januaryurged the center to remove GST from LIC Premium.