GST will not be levied on Directors Remuneration - CBIC
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The Central Board of Indirect Taxes and Customs (CBIC) on Wednesday said GST will not be levied on salaries paid to directors who are employees of the company. The CBIC issued a clarification following a ruling by the Rajasthan Authority of Advance Ruling (AAR) in April that said companies will have to pay GST on the remuneration they dole out to directors.
"The part of director's remuneration that are declared as 'salaries' in the books of a company and subjected to TDS under Section 192 of the IT Act, are 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," the CBIC said.
However, where the directors' remuneration is in the nature of professional fees and not salary, GST will be levied on a reverse charge basis.
"The part of employee director's remuneration which is declared separately other than 'salaries' in the company's accounts and subjected 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...the recipient of the said services, i.e. the company, is liable to discharge the applicable GST on it on a reverse charge basis," the CBIC said.
With regard to independent directors who are not the employees of the said company, the CBIC said services provided by them to the company in lieu of remuneration as the consideration for the said services will attract goods and services tax (GST).
"The recipient of the said services, i.e. the company, is liable to discharge the applicable GST on it on a reverse charge basis," it added. #casansaar (Source CBIC Circular, Economic Times)
"The part of director's remuneration that are declared as 'salaries' in the books of a company and subjected to TDS under Section 192 of the IT Act, are 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," the CBIC said.
However, where the directors' remuneration is in the nature of professional fees and not salary, GST will be levied on a reverse charge basis.
"The part of employee director's remuneration which is declared separately other than 'salaries' in the company's accounts and subjected 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...the recipient of the said services, i.e. the company, is liable to discharge the applicable GST on it on a reverse charge basis," the CBIC said.
With regard to independent directors who are not the employees of the said company, the CBIC said services provided by them to the company in lieu of remuneration as the consideration for the said services will attract goods and services tax (GST).
"The recipient of the said services, i.e. the company, is liable to discharge the applicable GST on it on a reverse charge basis," it added. #casansaar (Source CBIC Circular, Economic Times)
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