GST ON DIRECTOR'S REMUNERATION ON RCM BASIS

GST on Director’s Remuneration on RCM basis

Remuneration is a form of compensation given by the company to its directors for the services they have rendered. This remuneration can be in the form of salary, fees, or usage of company’s assets.

Capacity of Directors

In any company, the directors can hold the position in following capacities:
– Executive Director
– Non executive Director
– Managing Director
– Independent Director
– Small Shareholder Director
– Women Director
– Additional Director
– Alternate Director

Also Read: Quarterly Return Monthly Payment Scheme Under GST

Applicability of GST on remuneration paid to the directors

As per the GST laws, if the services provide from an employer to its employees in accordance with the employment agreement, then it is neither consider as supply of goods nor as supply of services. Therefore, GST will not be applicable in such cases. On the other hand, if the services are not classified as employer employee relationship, then GST will be applicable. This is in accordance with the CBIC’s circular on applicability of GST on director’s remuneration vide CGST circular no. 14/10/2020 dated 10th June, 2020.

Also Read: GST Registration On Basis Of State & Turnover

How to determine whether GST is applicable or not?

In order to determine whether GST is applicable or not, we need to check whether there is an employer-employee relationship or not. You can check the following two circumstances:

CIRCUMSTANCES WHERE GST IS APPLICABLE

Who is liable to pay GST – Company or Director?

Once it decide that GST is applicable, the next question that arises is who is liable to pay GST? The answer for the same lies in Serial No. 6 of Notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017. In addition, it states that services provide by Director of a company or body corporate to the said company or the body corporate is liable to tax under reverse charge. Thus, the company is liable to pay GST under the Reverse Charge Mechanism.

How Much GST is to be paid?

The company, which is a recipient of the service has to pay GST @18% on the total amount of the director’s remuneration.

Instances of GST on Director’s Remuneration

Category

Nature of Payment

Treatment

Independent Director or Non-Employee Director

Any payment

GST payable under Reverse Charge Mechanism

Whole Time Director including Managing Director

Remuneration of salary – TDS deducted under Section 192 of the Income Tax Act, 1961

GST is not payable (Employer-Employee relationship). 

Any Director

Sitting Fees

GST payable under Rever Charge Mechanism

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