GST on Director’s Remuneration

Introduction: This article discusses in detail about GST on Services of director i.e. sitting fees, commission etc.


The government has power u/s 9(3) of CGST Act & u/s 5(3) of IGST Act, to notify the levy of GST on RCM basis on goods or services.

Vide entry no. 6 of Notification No. 13/2017- Central Tax (Rate) dated 28th June 2017 & entry no. 7 of Notification No. 10/2017- Integrated Tax (Rate) dated 28th June 2017, Government had notified that any services supplied by a director of a company to the said company would be covered under reverse charge.

The relevant portion of the notifications is as below:



Category of Supply of Services Supplier of


Recipient of Service
(1) (2) (3) (4)
7 Services supplied by a director of a company or a body corporate to the said company or the body corporate. A director of a company or a body corporate The company or a body corporate located in the taxable territory.

As per section 2(102) of CGST Act, 2017, “services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.

Accordingly it may be construed that services of director, like:

  • sitting fees,
  • commission,
  • services charges for giving guarantee for loan taken by company

has been covered under the Government notified services on which the tax would be payable on reverse charge.

Person liable to pay GST

Under the GST Law, provisions related to applicability of reverse charge are governed by the Section 9(3) and Section 9(4) of the CGST Act.

Therefore, there are two cases in which the RCM is applicable:

  • Supplies notified by Government u/s 9(3)
  • Taxable Supplies by unregistered person to registered person

In case of RCM, the liability to pay tax is on the recipient of supply of goods and services instead of the supplier of such goods or services in respect of notified categories of supply.

As the director’s services are covered under section 9(3), the liability to pay tax is on the recipient company despite of the fact the turnover from director’s services exceeds Rs. 20L or 10L.

Are directors are liable for GST registration ?

As per notification no. 5/2017 – Central Tax dated 19th June, 2017, Government has specified that the persons who are only engaged in making supplies of taxable goods or services or both, the total tax on which is liable to be paid on reverse charge basis by the recipient of such goods or services or both under sub-section (3) of section 9 of the said Act as the category of persons exempted from obtaining registration under the aforesaid Act.

However, as per section 24(iii) of CGST Act, a person who is required to pay tax under RCM, shall be required to be registered compulsorily irrespective of its turnover.

In view of the above, it may be construed that:

  • The directors of the company are exempted from taking GST registration provided they providing only such services on which Tax is to be paid on RCM basis by the recipient of such services.
  • The company being required to pay tax on RCM basis, is required to get registered compulsorily irrespective of its turnover size.

Nature of Transaction

IGST or CGST&SGST that would be charged on such reverse charge services depending upon place of supply for such services & location of such supplier.

Determination of place of supply is of huge importance because, inter-state supplies are subject to IGST and intra-state supplies are subject to CGST and SGST.

Tax needs to be paid in the state where supply takes place, thereupon which it would land up in the hands of destination state government.

The principles of determining the nature of supply (i.e. inter state supply or intra state supply) remain the same in case of RCM as well since the government has merely chosen the recipient of goods/services as the point of convenience from the point of view of better compliance with the law.

Section 7 of the IGST Act states that where the location of the supplier and the place of supply are located in two different states or UTs, the transaction shall be an inter-state supply.

Section 8 of the IGST Act states that where the location of the supplier and place of supply are located in the same state or UT, the transaction will qualify as an intra-state transaction.

Place of supply

Section 12(2)(a) of the IGST Act determines place of supply as the location of person where the services are received.

A director services on the board of the company. The board is the supreme body of corporate governance. Therefore, it can be said that the place where directors’ services are being consumed is the place where the board of the company is situated.

It is place where key management and commercial discussions that are necessary for the conduct of the business of an entity as a whole.

Generally, the place of registered office of the company is such place.

However, in many cases the registered office is not at the place from where the company is effectively governed when companies have opted to register their offices in remote locations, say factories, tea gardens, original place of its formation, etc. Therefore, in such cases, the place where most of the substantive board meetings are held or the place where the apex management is seated should be the place of corporate governance.

It is to be understood that Board meeting is not a matter of travel or tourism interest. The directors may be meeting, say at a place other than the place of corporate governance. They may meet, for a change, at a holiday destination. However, the meeting is for discussion of matters of corporate governance. The discussions held in board meeting is not restricted to a particular place but governing decisions are taken for benefit of entity as whole. Therefore, no matter where they meet, the meeting still discusses matters pertaining to the company, and therefore, the usual place of corporate governance should still be taken as the place of supply.

Location of supplier in case of director services

As per section 2(15) of IGST Act, “location of the supplier of services” means,—

(a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business;

(b) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;

(c) where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provisions of the supply; and

(d) in absence of such places, the location of the usual place of residence of the supplier.

So, in case of director services, the location of supplier is the place where his usual place of residence is situated since such directors does not have any registered office.

Self invoicing in case of RCM

Section 31(3)(f) of the Act lays down that a registered person shall issue an invoice in respect of goods or services or both received from:

  • supplies covered u/s 9(3) and
  • unregistered suppliers covered u/s Sec 9(4).

There is no specific format released by the council for such invoices but the same need to be in compliant with the mandatory contents provided in Rule 46 of the CGST Rules.

Also when payment is made to such person, there is a need to issue payment voucher for documenting the transaction, the format of which is provided in Rule 52 of the CGST Rules.

The author is a practising CA based in Delhi and is registered Insolvency Professional. He can be reached at , Mob. +91 9953587496.

Disclaimer: The views expressed in this article are strictly personal. The content of this document are solely for informational purpose. It doesn’t constitute professional advice or recommendation. The Author does not accept any liabilities for any loss or damage of any kind arising out of information in this article and for any actions taken in reliance thereon.

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10 responses to “GST on Director’s Remuneration”

  1. Ananth says:

    What if the director is paid Rent by the company for lease of office space. Amount is less than 20 lacs per annum and director is not registered under GST

  2. Chirag Shah says:

    Dear Sir,

    GST on Directors seating fees are to be paid on RCM basis.

    What if Director is already a Registered under GST, do he require collecting GST on his fees?

  3. G.VITHAL says:

    Request for a format of Invoice for Director Fees
    as per section 31(3)(f)
    Apparently the Invoice will be prepared by the recipient of service whether the Invoice will be just ‘INVOICE’ OR ‘TAX INVOICE’

  4. JASPAL says:



  5. Abhinandan says:

    Why can’t we treat commission payment to directors as payment between employer-employee relationship, then such txn will be escaped out of gst.

    Further for a public co, sec 197 treat commsion payment to directors as a part of remuneration. cant we give such logic for proving employer-employee relationship.

    Further, under TDS also if a director draws fixed amount of commission every month then tds is deducted in 192 treating it as salary payment by whatever name called.

    Also solve one query: Under which section tds is deucted if commission is paid one time i.e at the end of the year. Whether 194J will apply or 192.

    whether the concept of deemed dividend will apply if commission is paid to director (whther pvt or public)

  6. Manohar Patel says:

    How much RCM Tax % on Directors Remuneration

  7. neelam says:

    What net amount of sitting fees to be paid to the directors.
    Whether the Company will deduct the tax amount from the seeting fees payable to the directors

  8. K K Gupta says:

    A co director’s residential address is Mumbai and he comes to Delhi to attend Board meeting as the registered office of the co is in Delhi.The payment made to the Dierector on account of setting fees is charged under RCM. In such case it may pl be clarified whether igst would be charged.

  9. Divya says:

    Company is paying Director Remuneration as Salary. Is it liable to pay GST under RCM??

    • vinodchaurasia says:

      Please refer point no 1 of schedule III of CGST Act, according to it services by an employee to the employer in the course of or in relation to his employment is not a supply.

      so Salary paid to director is not a supply. so no GST

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