Page 23 - GSTL_3rd September 2020_Vol 40_Part 1

GST ON DIRECTOR’S REMUNERATION —
ONGOING CONUNDRUM & CLARIFICA-
TION
GST ON DIRECTOR’S REMUNERATION
By
Debasish Bandyopadhyay, B.Com., LL.B., PGDFM

Much water has flown down the Ganga in the last
three years of the GST regime and many grey areas have
created ripples of dispute in the trade making the new tax
regime in the country unpopular. One such area which
has attracted considerable attention across the country is the leviability of GST on
remuneration paid by companies to the directors. In respect of statutory provi-
sion as laid down under Section 9(3) of CGST Act, 2017 and Notification No.
13/2017-C.T. (Rate), dated 28-6-2017, prescribe that services supplied by the Direc-
tor of a company to the said company shall be chargeable to tax under reverse
change mechanism. However, conflicting decisions delivered by AARs across the
country has made the issue of taxation of transactions between director and
company cloudier and uncertain.
Before going into the nitty-gritties of GST provision, let us understand
the definition of director as specified in the Companies Act, 2013. In terms of Sec-
tion 2(34) of the Act, a director means a person appointed to perform the duties
and functions of the director of a company in accordance with the provision of
the Companies Act, 2013. There are two types of directors known in the trade as
“Executive” and “Non-executive” Director.
An executive director can be a whole time director of the company i.e. a
person who devotes his whole time of working hours to the company and has a
significant personal interest in the company as a high source of income.
On the other hand, the non-executive director is a director who is not a
whole time director, he does not get involved in the day-to-day work but is in-
volved in planning and policymaking exercises of the company.
Even as a director is a trusted authority of a company but there is noth-
ing that forbids him from being an employee of any other company, since, Com-
panies Act, 2013 does not clearly specify or prohibit the same.
Coming back to the GST laws, it is worthwhile to mention that Schedule-
III under CGST Act, 2017 specifies activities which shall neither be constituted as
supply of goods nor supply of services within the purview of GST. Therefore, no
GST LAW TIMES  3rd September 2020  39