Understanding GST implications on payments to Directors is crucial for companies to ensure compliance and avoid potential penalties. This article examines the GST treatment for services provided by Directors in different capacities, shedding light on the applicable regulations and highlighting key considerations for businesses.
Snapshot for GST on Services by Director
- Services as an Employee: Entry no. 1 of Schedule III specifies ‘Services by an employee to the employer in the course of or in relation to his employment’ is neither a good nor services. Hence, GST is not applicable on this transaction.
- Services in Director capacity: GST is payable under RCM by the Company in which the person is director – N/N 13/2017 (Central Tax) (e.g. Director sitting fees)
- Services in Personal Capacity: GST is payable under normal charge mechanism by the Director (if not exempt supply) – Circular no. 201/13/2023-GST
Provision of Services by Director as an Employee of the Company
GST applicability on Services by Director in the personal/ individual capacity
- Services by director in the personal capacity and no in the capacity of director shall be chargeable to GST under Normal Charge Mechanism.
- The GST shall not be paid by the Company under RCM on such services
- The services may include:
- Renting of immovable property.
- Sale or purchase of goods.
- Professional or technical Services.
Conclusion: Understanding the GST implications on payments to Directors is essential for companies to fulfill their tax obligations accurately. By distinguishing between services provided by Directors in their capacity as employees, directors, or personal service providers, businesses can effectively manage their GST compliance and minimize any associated risks. This guide serves as a valuable resource for companies seeking clarity on this complex aspect of taxation.
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