GST on Director's Fees

[Kaustubh Karandikar]

XYZ is a Director in PQR Ltd. Chennai (Not on pay roll) as well as ABC, Mumbai (On pay roll) having a common parent company EFG in Japan. The Directors sitting fees including other incidental expenses for attending meetings at PQR, Chennai are paid by EFG in foreign currency but to ABC, Mumbai since XYZ is representing ABC while attending meetings of PQR. Is ABC, Mumbai liable to pay GST on it?

[Ganeshan Kalyani]

In my view, it is important to see the supplier of service and the receiver. PQR is the receiver in this example and accordingly it is liable to pay tax under RCM.

[sarojni singh]

We note that the provision of director services is not itself a taxable activity for GST purposes. This means that a professional director who personally provides director services should not be subject to GST on any fees received, no matter how many directorships the person accepts.

[KASTURI SETHI]

Relevant FAQ

(16) Whether payment of sitting fees to directors covered in the provisions of reverse charge under director services.

Reply : Yes, it is covered. Please see S. No. 6 of Table to Notification No. 13/2017-Central Tax (Rate), dated 28-6-2017.

[YAGAY and SUN]

The Directors Sitting fees is liable to be taxed under the provisions of GST Laws.

Recently the GST Department is in the process of issuance of notices to the companies on Directors' remuneration despite of having AARs.

AI Summary

Reverse charge on director sitting fees: recipient may be liable under GST for payments routed through related entities.
Director sitting fees paid through a related entity may be taxable under GST and can fall under the Reverse Charge Mechanism, making the service recipient liable; commentators differ, with some maintaining director services are not taxable when supplied by an individual, while others cite the notification entry treating director sitting fees as chargeable under reverse charge and report recent enforcement activity issuing notices to companies on directors' remuneration.