No GST applicable on Reimbursement of Salary on behalf of Foreign Entity: AAR [Read Order]

The Maharashtra Authority of Advance Ruling has ruled that, Goods and Services Tax ( GST ) is not applicable on Reimbursement of Salary on behalf of Foreign Entity.

The applicant DRS Marine Services Private Limited is a Crew Recruitment and Placement Agency, and are involved in selecting and recruiting shipping personnel on behalf of their principal/client who is a Foreign Ship Owner and for which they are charging Administration fees and paying GST on such Administration charges so received.

The applicant has submitted that their principal has requested them for disbursal of salary to the crew members from the applicant’s side, for which the principal would be transferring the sum of total salary to the applicant who in turn will be disbursing the salary to the crew member through banking channels into their respective accounts. For this activity, the applicant would be charging/ invoicing service charges to the principal and on the said charges they would be discharging their GST liability.

The Applicant has further submitted that the above said activity of distributing salaries would on behalf of their Foreign Principal & they would not be deducting any charges from the amount of salary received for disbursement. Hence, they have contended that, the amount so remitted towards disbursal of salary would not be taxable under GST in view of provisions of 33 of the CGST Rules, 2017.

While ruling in favour of applicant, the AAR observed that, “the applicant will be acting as a pure agent of RMS in as much as the entire amount received by them as Crews’ Salary will be disbursed to the Crew and no amounts from the said receipt will be used by the applicant for his own interest. In fact, for performing as a pure agent they will also be receiving compensation separately in the form of fixed fees to be charged as service charges. In view of the above we are of the opinion that the applicant will not be liable to pay GST on Salary amount received from RMS and disbursed to the Crew”.