RCM is not applicable on reimbursement of expenses paid on behalf of the company at actuals which are incurred by employee/staff being a whole-time director of the company

 

The Reverse Charge Mechanism does not apply to reimbursements of expenses that have been incurred by an employee or staff member who is also a whole-time director of a company, and have been paid on behalf of the company at actuals. This was the subject of an advance ruling sought by an applicant company, where the director had incurred expenses related to transactions with Goods Transport Agencies, lawyers/advocates, and imported services. The Karnataka Authority for Advance Rulings (AAR) concluded that such reimbursements to the director, who is also an employee of the company, do not qualify as consideration, and hence, the Reverse Charge Mechanism does not apply to them.

Yaadvi Scientific Solutions Pvt. Ltd. – AAR-Karnataka