Clarification on Professional Tax liability

[Prakash Kothari]

Company having its registered and corporate office in Mumbai. Discharge professional tax liability of directors in the state of Maharashtra. However, few states basis on GST registration demanded the professional tax liability on remuneration paid to director. Query is if a director is on the payroll of the company and receives remuneration through the corporate office located in a particular state, the professional tax is deducted and paid only in that state or all state?  

[YAGAY andSUN]

Professional tax is a state-specific levy governed by the respective State Professional Tax Acts, and the liability to deduct and pay professional tax arises in the state where the employer–employee relationship is exercised and the employment is located. Where a director is on the payroll of the company (i.e., treated as an employee) and receives remuneration through the corporate/registered office situated in Maharashtra, the company is required to deduct and discharge professional tax only in Maharashtra, subject to the applicable slabs under the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975. The mere existence of GST registrations or branch offices in other states does not, by itself, create a professional tax liability in those states.

Accordingly, professional tax is not payable in multiple states unless the director is employed in, or renders services from, establishments located in those other states, or is otherwise covered under the charging provisions of the respective state professional tax laws. Demands raised by other states solely on the basis of GST registration, place of supply, or cross-charge mechanisms are legally unsustainable, as professional tax is not linked to GST registration or indirect tax presence, but strictly to the location of employment and the employer’s establishment from which remuneration is paid and services are rendered.

AI Summary

Professional tax liability for directors where payroll is located: deduction payable in state of employment only, not across states. Professional tax liability for directors arises under state professional tax laws and depends on where the employer-employee relationship is exercised and services are rendered. If a director is on payroll and remuneration is paid from the corporate/registered office in Maharashtra, the company must deduct and pay professional tax only in Maharashtra under the applicable state slabs; other states' demands based solely on GST registration or place of supply are not legally sustainable. Professional tax becomes chargeable in additional states only if the director is employed in, renders services from, or is otherwise covered by the charging provisions of those states' laws.