The question of whether GST on reverse charge is applicable on Directors’ remuneration had been in debate for some time now, with contradictory views expressed by different authorities in the process of litigation.

CBIC has now issued a Clarification w.r.t. levy of GST on Directors’ remuneration.

Vide this circular issued on 10th May, 2020, it is clarified that the part of Directors’ remuneration which is declared as ‘Salaries’ in the books of accounts of a Company and subject to TDS under Section 192 of the IT Act, is 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.

However, the part of employee Directors’ remuneration which is declared separately other than ‘salaries’ in the Company’s books of accounts and subject 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 under GST.

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.

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Qualification: CA in Practice
Company: Sanjay Thampy and Associates
Location: Mumbai, Maharashtra, IN
Member Since: 22 Apr 2020 | Total Posts: 9
A practicing Chartered Accountant, I expertise in direct and indirect tax laws providing advisory services to various large and medium sized corporates. View Full Profile

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March 2021