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GST on remuneration paid to directors

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As per section 2(78) of the Companies Act, 2013, "Remuneration" means any money or its equivalent given or passed to any person for services rendered by him and includes perquisites as defined under the Income-tax Act, 1961 (43 of 1961).

In straightforward terms, remuneration is any type of compensation that an individual or employee receives as payment for services rendered to the organization or company. In this article, we will discuss GST implications on remuneration paid to directors.

Taxability of Director’s remuneration in GST

In order to determine the applicability of GST on remuneration to directors, we first need to conclude whether the director is an employee of the company or not. The following situations are possible:

Situation 1: Payment of remuneration to independent directors or those directors who are not employees of the company will be taxable under GST.

  • In such a case, the company shall be liable to deposit tax on a reverse charge basis.

Situation 2: Payment of remuneration to directors who are employees of the company,

  • GST will not be levied on the part of director remuneration if

(i) it is declared as Salaries in the books of the company;

(ii) it is subjected to TDS under section 192 of the Income Tax Act;

(iii) It is as consideration for services by a director in the course of the employer-employee relationship.

  • GST will be levied on the part of director remuneration if

(i) it is declared separately other than salaries in the books of the company;

(ii) it is subjected to TDS under section 194J of the Income Tax Act;

(iii) It is as fees for professional or technical services by a director. 

Applicability of reverse charge (RCM) on the remuneration of directors

Reverse charge means the recipient of goods or services is liable to pay tax on supply instead of the supplier of such goods or services. Under RCM, all provisions of GST law shall apply to the recipient as he is a person who is liable to pay tax.

Services supplied by a director of a company or a body corporate to the said company or the body corporate will be taxable in the hands of the recipient under RCM. Accordingly, the company is liable to deposit GST on the taxable director's services. 

GST rate applicable on Director's remuneration

Services provided by a director to the company shall be taxable at a tax rate of 18%. Thus in the case of intra-State supply, CGST @ 9% and SGST @ 9% will be applicable. On the other hand, IGST @ 18% will be applicable to inter-State supply.

Availability of input tax credit

The sitting fee etc paid to non-executive directors are paid for business purposes and thus input tax credit (ITC) on such expenses can be availed by the Company. It is relevant to note that ITC of GST paid under RCM (on supplies from unregistered persons) can only be availed on basis of a self invoice issued by the company.


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CA Anand Singh

CA Anand Singh

I am a practising Chartered Accountant with 6 years of experience in Direct and Indirect Taxation, FEMA, Corporate Law and Audit etc.