The matter regarding applicability of GST on Director remuneration paid to full time / executive Directors has been subject to different interpretations in various ruling of AAR. In some Ruling it is adjudged that such remuneration would be subject to GST under reverse charge while in the recent one, ruling was given that remuneration paid to full time directors is not exigible to GST.
Considering the dilemma of the tax payers as they were confronted from contradictory / different ruling in regard to GST on remuneration to Directors, it has now finally been clarified by CBIC vide Circular No. 140/10/2020-GST dated 10.06.2020 as under:-
No GST on Director remuneration declared as Salaries in the books
Part of Director‟s remuneration which are declared as „Salaries‟ in the books of a company and subjected to TDS under Section 192 of the IT Act, are not taxable being consideration for services by 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.
GST under reverse charge on other director remuneration
It is further clarified vide said CBIC Circular that the part of employee Director‟s remuneration which is declared separately other than „salaries‟ in the Company‟s accounts and subjected to TDS under Section 194J of the IT 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, and is therefore, taxable. Further, in terms of notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis.
The position of taxability of Director remuneration as clarified above is in line with the position prevailed under erstwhile Service Tax law , wherein also director services were covered under reverse charge mechanism and employee services were outside ambit of service tax.
The above Circular was much awaited and will definitely evaporate the mist in regard to taxability of Director remuneration and provide certainty in this regard.
As is said” Death and taxes in life are certain, knowing how to pay only your fair share is third”
For ready reference of our readers the Circular is as under:-
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