RCM on Sitting fees for urban CO Op Bank

[KS Bhat]

Is Urban Co Operative Bank Need to pay GST under RCM for Directors Sitting fees  Directors are not full time employees all are selected via election and few  nomination the payment made only for attending directors meeting  

[Sadanand Bulbule]

Refer CBIC Circular No. 140/10/2020-GST dated 10/06/2020. Since Urban Co-Operatibe Bank is a Body Corporate, sitting fees for services supplied by the directors is laible for GST under RCM. Election or nomiation of a director is immaterial.

[Ryan Vaz]

Applicable Law / Notification / Circular

1. Section 9(3), CGST Act, 2017 – Government may notify supplies on which tax is payable under RCM.

2. Notification No. 13/2017 – Central Tax (Rate) dated 28-06-2017, Entry No. 6

   Services supplied by a director of a company or body corporate to the said company/body corporate – GST payable by the recipient under RCM.

3. CBIC Circular No. 140/10/2020-GST dated 10-06-2020

   • Clarifies GST under RCM applies on directors’ remuneration/fees where director is not an employee.

   • Only salary paid to whole-time directors/employees covered under Schedule III (employer-employee) is outside GST.

4. Section 2(11), CGST Act – “Body Corporate” includes entities like Co-operative Banks registered under Co-operative Societies Act.

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Short Practical Answer

? Yes.
An Urban Co-operative Bank is required to pay GST under RCM on directors’ sitting fees paid to elected or nominated directors who are not full-time employees of the bank.

[KS Bhat]

Sir

RCM applicable to body corporate directors sitting fees  where as urban Co operative society registered under state co operative act is not considered body corporate as per section 2(11) company act since GST act not defined body corporate  

[KASTURI SETHI]

FAQ dated 7.8.17

Q. No. 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.

[KS Bhat]

Sir

RCM applicable to body corporate directors sitting fees  where as urban Co operative society registered under state co operative act is not considered body corporate as per section 2(11) company act since GST act not defined body corporate  

[Sadanand Bulbule]

Dear all

Plz refer Section 2(84) of the CGST Act which defines "person" which includes various entities.

GST being an indirect tax is cross-fertlisation of many statutes. So it has to read together with other related statues to arrive at the intention of the lawmakers. Since many terms are not defined under the GST Act, one need to borrow the meaning assigned to a perticular term under other related satutes. For example, currency is a goods under the Customs Act, whereas it is kept outside the definition of goods under the GST Act. There are many such debatable issues which requires broder understanding to reach the ultimate object.

[Shilpi Jain]

 “Body Corporate” has the same meaning as assigned to it in clause (11) of section 2 of the Companies Act, 2013.

This is the definition given in the services RCM notification. 

Under Cos Act, coop society is not a body corporate. So no RCM in this case.

AI Summary

Urban co operative bank sitting fees for non whole time directors are generally taxable under reverse charge, subject to entity status.
The key operative point is that sitting fees paid to non whole time directors are treated as services taxable under the reverse charge mechanism, payable by the recipient when the recipient qualifies as a company or body corporate; whole time directors in an employer employee relationship are excluded. A dispute arises where a co operative entity's status as a body corporate is contested, affecting whether RCM applies to its payment of directors' sitting fees.