GST on Remuneration paid to Directors via Case Analysis

GST on Remuneration paid to Directors

*(AAR - Authority for Advance Ruling)

Overview:

Clay Craft India Pvt Ltd has filed an application before the Rajasthan bench of the AAR to sought clarification on whether salaries paid to directors would attract Goods and Services Tax.

Company’s key points:

• The company said its directors are working as employees for which they are being compensated by way of a regular salary and other allowances.
• The company is deducting TDS on their salary and PF laws are also applicable to their service.
• directors are the employees of the company and are working as such besides being Director of the company.

Remarks by Authority for Advance Ruling

• The consideration paid to the directors by the applicant company will attract GST under reverse charge mechanism.
• Director is the supplier of services and the applicant of the company is the recipient of the services.

Order by AAR:

The services rendered by the Director to the company for which consideration is paid to them in any head is liable to pay GST under RCM (Reverse Charge Mechanism),

Conclusion:

Companies will have to pay GST on the remuneration they dole out to directors.

Link of the order :

IN RE: M/S. CLAY CRAFT INDIA PVT. LTD. [2020 (4) TMI 228 - AUTHORITY FOR ADVANCE RULING RAJASTHAN]