Important Keyword: Circular No. 201/13/2023-GST, GST on Director Services, Reverse Charge Mechanism GST, Director Personal Capacity GST, Renting Property to Company GST, GST on Cinema Food, Restaurant Service GST, Cinema Hall GST, Composite Supply GST, Notification No. 13/2017-Central Tax (Rate), Notification No. 11/2017-Central Tax (Rate), CBIC Circular 201/13/2023, GST Clarifications on Certain Services,
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F. No. 190354/133/2023-TRU
Government of India
Ministry of Finance
Department of Revenue
*****
North Block, New Delhi,
Dated the 1st August, 2023
Circular No. 201/13/2023 - GST: Clarifications Regarding Applicability of GST on Certain Services
To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioner of Central Tax (All) /
The Principal Director Generals/ Director Generals (All)
Madam/Sir,
Subject: Clarifications regarding applicability of GST on certain services – reg.
Representations have been received seeking clarifications on the following issues.
- Whether services supplied by director of a company in his personal capacity such as renting of immovable property to the company or body corporate are subject to Reverse Charge mechanism.
- Whether supply of food or beverages in cinema hall is taxable as restaurant service.
The above issues have been examined by GST Council in the 50th meeting held on 11th July, 2023. The issue -wise clarifications as recommended by the Council are given below:
Whether services supplied by director of a company in his personal capacity such as renting of immovable property to the company or body corporate are subject to Reverse Charge mechanism:
2. Reference has been received 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 Reverse Charge Mechanism (RCM) or not.
2.1 Entry No. 6 of notification No. 13/2017 CTR dated 28.06.2017 provides that tax on services supplied by director of a company or a body corporate to the said company or the body corporate shall be paid by the company or the body corporate under Reverse Charge Mechanism.
2.2 It is hereby 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. Only those services supplied by director of company or body corporate, which are supplied by him as or in the capacity of director of that company or body corporate shall be taxable under RCM in the hands of the company or body corporate under notification No. 13/2017-CTR (Sl. No. 6) dated 28.06.2017.
Whether supply of food or beverages in cinema hall is taxable as restaurant service:
3 References have been received requesting for clarification whether supply of food and beverages at cinema halls is taxable as restaurant service which attract GST at the rate of 5% or not.
3.1 As per Explanation at Para 4 (xxxii) to notification No. 11/2017-CTR dated 28.06.2017, “Restaurant Service’ means supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied.”
3.2 Eating joint is a wide term which includes refreshment or eating stalls/ kiosks/ counters or restaurant at a cinema also.
3.3 The cinema operator may run this refreshment or eating stalls/ kiosks/ counters or restaurant themselves or they may give it on contract to a third party. The customer may like to avail the services supplied by these refreshment/snack counters or choose not to avail these services. Further, the cinema operator can also install vending machines, or supply any other recreational service such as through coin-operated machines etc. which a customer may or may not avail.
3.4 It is hereby clarified that supply of food or beverages in a cinema hall is taxable as ‘restaurant service’ as long as:
3.5 It is further clarified that where the sale of cinema ticket and supply of food and beverages are clubbed together, and such bundled supply satisfies the test of composite supply, the entire supply will attract GST at the rate applicable to service of exhibition of cinema, the principal supply.
4. Difficulties, if any, in implementation of this circular may be brought to the notice of the Board.
Yours faithfully,
(Rajeev Ranjan)
Under Secretary, TRU
******
📚 Frequently Asked Questions (FAQs): Circular No. 201/13/2023 - GST
Q1. What is Circular No. 201/13/2023-GST?
Answer:
Circular No. 201/13/2023-GST clarifies the GST treatment of two practical issues that created confusion among taxpayers. First, it explains whether services supplied by a director in a personal capacity, such as renting property to the company, are covered under the Reverse Charge Mechanism (RCM). Second, it clarifies the GST rate applicable to food and beverages supplied in cinema halls. The clarifications are based on the recommendations of the 50th GST Council Meeting.
Q2. Is GST under Reverse Charge applicable when a director rents personal property to the company?
Answer:
No. Renting of immovable property by a director to the company in his or her personal capacity is not covered under the Reverse Charge Mechanism (RCM).
In simple terms, only services supplied in the capacity of a director fall under Entry No. 6 of Notification No. 13/2017-Central Tax (Rate). If the director is acting as a property owner and not as a director, GST under RCM does not apply.
Q3. Which director services are covered under Reverse Charge Mechanism (RCM)?
Answer:
Only those services that a person provides because of their position as a director of the company are covered under the Reverse Charge Mechanism.
Many businesses actually face this issue because the same individual can act in different capacities. For example, board-related services, participation in management, or services performed as a director fall under RCM, whereas personal transactions like renting one's own property do not.
Q4. Why did CBIC clarify the GST treatment of directors' personal services?
Answer:
The clarification was issued because businesses were uncertain whether every transaction between a director and the company automatically attracted Reverse Charge Mechanism.
The circular makes an important distinction between services supplied as a director and services supplied in an individual's private capacity. This helps businesses correctly determine GST liability and prevents unnecessary tax payments under RCM.
Q5. Is the supply of food and beverages in a cinema hall treated as restaurant service?
Answer:
Yes, provided certain conditions are satisfied. Food and beverages supplied in cinema halls are treated as restaurant services when they are supplied as part of a food service and are independent of the cinema exhibition service.
This means food sold through snack counters, kiosks, restaurants, or refreshment stalls inside a cinema generally qualifies as restaurant service and attracts GST applicable to restaurant services.
Q6. Does it matter whether the cinema operates the food counter itself or through a contractor?
Answer:
No. The GST treatment remains the same irrespective of whether the cinema operator manages the food counter directly or outsources it to a third party.
Let’s understand this with an example. Suppose a multiplex leases its food court to a catering company. The food supplied by that catering company can still qualify as restaurant service if the conditions specified in the circular are fulfilled.
Q7. What happens if cinema tickets and food are sold together as one package?
Answer:
If the sale of cinema tickets and food or beverages is bundled together and qualifies as a composite supply, GST will be charged at the rate applicable to the principal supply, which is the cinema exhibition service.
If you look at it practically, businesses should carefully structure promotional packages because the GST treatment depends on whether the transaction qualifies as a composite supply under the GST law.
Q8. What is considered a restaurant service under this circular?
Answer:
The circular refers to the definition of restaurant service under Notification No. 11/2017-Central Tax (Rate). It clarifies that eating joints include refreshment stalls, snack counters, kiosks, and restaurants located inside cinema halls.
Accordingly, food supplied through these facilities is treated as restaurant service when supplied independently of the cinema exhibition service.
Q9. Why is this circular important for companies and cinema operators?
Answer:
This circular removes two common areas of GST confusion. Companies now have clarity on whether GST under Reverse Charge applies to directors' personal transactions, while cinema operators have certainty regarding the GST treatment of food and beverage sales.
This helps businesses structure agreements, prepare invoices correctly, and reduce the risk of disputes during GST audits.
Related Resource:
GST Compliance: https://finodha.in/gst-compliance/
Q10. Does this circular change the GST law?
Answer:
No. Circular No. 201/13/2023-GST is clarificatory in nature.
It does not amend the CGST Act or the relevant GST notifications. Instead, it explains the correct interpretation of Notification No. 13/2017-Central Tax (Rate) relating to Reverse Charge Mechanism and Notification No. 11/2017-Central Tax (Rate) relating to restaurant services.
Download PDF: Circular No. 201/13/2023 - GST
More Information: https://taxinformation.cbic.gov.in/
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