Clarification in respect of levy of GST on Director’s Remuneration
Clarification in respect of levy of GST on Director’s Remuneration
The Central Board of Indirect Taxes and Customs (CBIC) vide circular no. 140/10/2020 dated 10th June 2020 clarified that the part of director’s remuneration that are declared as “Salaries” in the books of a company and subject to TDS under section 192 of the Income Tax Act, are not taxable being consideration for services by the Director (an employee) to the employer in the course of or in relation to his employment in terms of Schedule III of the CGST Act, 2017. Hence GST will not be levied on the salaries paid to Directors.
The part of employees or director’s remuneration which is declared separately other than “Salaries” in the company’s accounts and subjected to TDS under section 194J of the Income Tax Act as “fees for professional or technical services” shall be treated as consideration for providing services which are outside the scope of Schedule III of the CGST Act, 2017 and is therefore taxable. Further in terms of notification no.13/2017 dated 28.06.2017 the recipient of the said services i.e. the company is liable to discharge the applicable GST (i.e. 18%) on Reverse Charge Basis (RCM).
With regard to Independent directors who are not the employees of the company, the Directors’ Sitting Fees paid as the consideration for the said services will attract GST. The recipient of the said services i.e. the company is liable to discharge the applicable GST (i.e. 18%) on Reverse Charge Basis (RCM).
