Page 19 - GSTL_20th August 2020_Vol 39_Part 3

GST ON DIRECTOR’S REMUNERATION : AN ANALYSIS OF CBIC’S CLARIFICATION
GST ON DIRECTOR’S REMUNERATION —
AN ANALYSIS OF CBIC’S CLARIFICATION
By
Dr. Sanjiv Agarwal, FCA, FCS

There has been a lot of confusion on taxability of
Director’s Remuneration paid by companies in which
they are Directors in different forms. The confusion or
doubts got mounted in the wake of recent conflicting ad-
vance rulings.
C.B.I. & C. has now come out with a detailed Cir-
cular No. 140/10/2020-GST, dated 10-6-2020 [2020 (37) G.S.T.L. C10] which clari-
fies the issues involved.
This Circular examines following two situations in relation to Director’s
Remuneration :
(a) leviability of GST on remuneration paid by companies to the inde-
pendent Directors defined in terms of Section 149(6) of the Compa-
nies Act, 2013 or those Directors who are not the employees of the
said company.
(b) leviability of GST on remuneration paid by companies to the whole-
time Directors including Managing Director who are employees of
the said company.
Based on clarification, the following position emerges :-

GST on Director’s Remuneration
Whole time Directors (Employee) Non-executive/Independent Directors
As employee, not a taxable supply to As Director, taxable supply to company
company
GST - Not taxable GST - Taxable and payable under reverse
charge

The companies need to understand the difference between the two kinds
of Directors. In the Board, all Directors are equal but for taxation under GST, one
needs to understand whether the Director is employee of the company or not?
The following points are worth noting :

GST LAW TIMES  20th August 2020  19