GST on Director Remuneration
This query is : Open
22 April 2020
Dear Sir,
I am a Director in a Private Limited company which is registered under GST. I want to know if the company gives me Salary in the form of Director Remuneration does the company has to charge GST on it. I am not registered under GST as an individual. How will this transaction take place.
Regards,
Divyesh Jain
I am a Director in a Private Limited company which is registered under GST. I want to know if the company gives me Salary in the form of Director Remuneration does the company has to charge GST on it. I am not registered under GST as an individual. How will this transaction take place.
Regards,
Divyesh Jain
23 April 2020
Remuneration paid to directors to attract GST: AAR In an application filed before the Rajasthan bench of the AAR, Clay Craft India Pvt Ltd had sought clarification on whether salaries paid to directors would attract Goods and Services Tax. The company said its directors are working as employees
Companies will have to pay GST on the remuneration they role out to directors, the Authority for Advance Ruling (AAR) has said.
In an application filed before the Rajasthan bench of the AAR, Clay Craft India Pvt Ltd had sought clarification on whether salaries paid to directors would attract Goods and Services Tax.
The company said its directors are working as employees for which they are being compensated by way of a regular salary and other allowances.
"The company is deducting TDS on their salary and PF laws are also applicable to their service. Therefore, in all practical purposes these directors are the employees of the company and are working as such besides being Director of the company," it said.
In its ruling, the AAR said, "the consideration paid to the directors by the applicant company will attract GST under reverse charge mechanism..."
The AAR, while analysing the case, said that Director is the supplier of services and the applicant of the company is the recipient of the services.
It said that the Central Tax (Rate) notification clearly states that services supplied by a Director of a company will be considered as supply and hence directors cannot be called an employee.
"So it is very clear that the services rendered by the Director to the company for which consideration is paid to them in any head is liable to pay GST under RCM (Reverse Charge Mechanism)," the AAR order said.
AMRG & Associates Senior Partner Rajat Mohan said, "This ruling needs to be clarified by government, otherwise, lower authorities may take legally incorrect view creating havoc in the business community".
Companies will have to pay GST on the remuneration they role out to directors, the Authority for Advance Ruling (AAR) has said.
In an application filed before the Rajasthan bench of the AAR, Clay Craft India Pvt Ltd had sought clarification on whether salaries paid to directors would attract Goods and Services Tax.
The company said its directors are working as employees for which they are being compensated by way of a regular salary and other allowances.
"The company is deducting TDS on their salary and PF laws are also applicable to their service. Therefore, in all practical purposes these directors are the employees of the company and are working as such besides being Director of the company," it said.
In its ruling, the AAR said, "the consideration paid to the directors by the applicant company will attract GST under reverse charge mechanism..."
The AAR, while analysing the case, said that Director is the supplier of services and the applicant of the company is the recipient of the services.
It said that the Central Tax (Rate) notification clearly states that services supplied by a Director of a company will be considered as supply and hence directors cannot be called an employee.
"So it is very clear that the services rendered by the Director to the company for which consideration is paid to them in any head is liable to pay GST under RCM (Reverse Charge Mechanism)," the AAR order said.
AMRG & Associates Senior Partner Rajat Mohan said, "This ruling needs to be clarified by government, otherwise, lower authorities may take legally incorrect view creating havoc in the business community".
23 April 2020
Dear Kaviraja Sir,
I am not working as an employee in the company, just drawing salaries on the profits earned from the company.
In that case, I think the above case laws is not applicable in my case.
I am not working as an employee in the company, just drawing salaries on the profits earned from the company.
In that case, I think the above case laws is not applicable in my case.
23 April 2020
For salary GST under RCM (Reverse Charge Mechanism) applicable , company should pay GST
23 April 2020
GST not applicable for salary to director as if it's treated u/s 192 of IT act. The AAR is wrongly filed...
23 April 2020
Director is the head of a company or corporate body. The services offered by a director include that related to a company or body corporate. The following mentions the examples of services offered by a Director for payable remuneration:
Sitting fees,
Commission,
Services charges for providing a guarantee for a loan taken by the company
Applicability of GST on Directors Remuneration
The Central Board of Indirect Taxes and Customs (CBIC) has clarified that GST is applicable on Directors Remuneration on reverse charge basis. When the reverse charge applies while filing the returns, the recipient of the service should pay taxes on the reverse charge. Hence, in the case of Directors Remuneration, the recipient of service, the company becomes liable for the payment of GST on Directors Remuneration.
Place of Supply
The taxpayer should determine the place of supply to calculate IGST or CGST and SGST. The supplier shall consider the place of supply where the delivery takes place. A director delivers services to the board of the company. The board is the highest body of corporate governance. For that reason, it can be mentioned that the place where directors’ services are being consumed is the place where the board of the company is located, its registered office.
Sitting fees,
Commission,
Services charges for providing a guarantee for a loan taken by the company
Applicability of GST on Directors Remuneration
The Central Board of Indirect Taxes and Customs (CBIC) has clarified that GST is applicable on Directors Remuneration on reverse charge basis. When the reverse charge applies while filing the returns, the recipient of the service should pay taxes on the reverse charge. Hence, in the case of Directors Remuneration, the recipient of service, the company becomes liable for the payment of GST on Directors Remuneration.
Place of Supply
The taxpayer should determine the place of supply to calculate IGST or CGST and SGST. The supplier shall consider the place of supply where the delivery takes place. A director delivers services to the board of the company. The board is the highest body of corporate governance. For that reason, it can be mentioned that the place where directors’ services are being consumed is the place where the board of the company is located, its registered office.
11 May 2020
Sharing a link with you people which says GST is not applicable on Salary to Director.
https://economictimes.indiatimes.com/news/politics-and-nation/directors-salary-exempt-from-gst-karnataka-aar-ruling/articleshow/75664747.cms
https://economictimes.indiatimes.com/news/politics-and-nation/directors-salary-exempt-from-gst-karnataka-aar-ruling/articleshow/75664747.cms
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