The issue pertaining to Director Remuneration has been examined by the CBIC and they have clarified the position vide Circular No: 140/10/2020 – GST dated 10.06.2020 in line with our opinion. The Circular is attached here for your ease of reference.
Directors who are not employees of the Company e.g. Independent Directors
Remuneration paid to such directors is liable to GST under Reverse Charge Mechanism.
Directors who are employees of the Company
A director who is an employee of the Company may provide services both as an employee and also as an independent professional. In such a case, GST liability may be ascertained in the following manner:
- Remuneration paid to a director employee which is accounted under the head “Salaries” by the Company in its books of accounts and TDS has also been deducted u/s 192 of Income Tax Act, 1961 would not be subject to GST.
- Remuneration paid to a director employee which is accounted under any head other than “Salaries” by the Company in its books of accounts and TDS has been deducted u/s 194J of Income Tax Act, 1961 as Fees for Professional or Technical Servicesshall be treated as consideration for providing services and shall be liable to pay GST on the same under Reverse Charge Mechanism.