GST ON INCENTIVE PAID TO DIRECTOR

[knr varma]

ABC COMPANY HAVING TWO DIRECTORS,ONE DIRECTOR MARKETING THEIR COMPANY(abc) PRODUCTS AND GETTING INCENTIVE YEARLY BASIS.

ABOVE CASE COMPANY HAS LIABLE TO PAY GST OR NOT ?

THANKS IN ADVANCE

[Himansu Sekhar]

If the Director is an employee, incentives carry the employer & employee relationship. No GST

[knr varma]

DIRECTOR WORKING FOR COMPANY AS A MARKETING HEAD , BUT COMPANY PROVIDING INCENTIVE FOR DIRECTOR ONLY , COMPANY NOT PROVIDING INCENTIVE FOR STAFF ,

[Ganeshan Kalyani]

GST is not applicable on the incentive amount paid to the whole time director. This is because there is employer employee relationship between the company and the director.

[KASTURI SETHI]

Incentive paid to Director of the Company falls under the term, "Salary", hence there is no deviation from employer-employee relationship. Hence no GST applicable.I support the views of both experts.

[Alkesh Jani]

Sir, I have a small confusion that when services provided by the Director to the Company, and is taxable, how employer and employee relation is established?

[Himansu Sekhar]

please verify the Section under which the TDS is deducted. whether Sec. 192 or 194.

[Himansu Sekhar]

Sect. 192 deals with salary payments.

[KASTURI SETHI]

Sh.Himansu Ji,

Now you have cemented your view.

[Himansu Sekhar]

thank you sir

[Alkesh Jani]

Sir, thanks all for sharing such a good knowledge. So, if the Director is getting Remuneration and TDS is deducted under Section 194, then incentives is also to be add to service provided by the Director to the Company and if Salary is paid under Section 192 then it shall be treated as neither supply of good or service as stated in Schedule III of CGST Act, 2017. This is what I understood. Please correct me, if mistaken.

Thanks again to all

[DR.MARIAPPAN GOVINDARAJAN]

A brief discussion on the issue.

[Himansu Sekhar]

An addition to my contentions even if the circular is issued during 2009. It may not be applied in the present context.

Circular No. 115/09/2009 – ST dated 31.7.2009

[Himansu Sekhar]

the General Circular No. 24/2012 dated 9.8.2012 of Ministry of Corporate Affairs, Government of India may also be referred in this regard. It is available in the site.

AI Summary

GST treatment of director incentives: treated as salary if taxed under salary provisions, otherwise may be taxable as service. GST applicability to director incentives depends on characterisation: incentives treated as salary within an employer employee relationship (reflected by TDS under salary provisions) are not taxable supplies under Schedule III, whereas payments characterised and taxed as fees or remuneration for services outside employment may be taxable as services for GST.