GST on Remuneration paid to Directors


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 copy:

Click Here to Download the Order

Disclaimer:

IN NO EVENT THE AUTHOR SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM OR ARISING OUT OF OR IN CONNECTION WITH THE USE OF THIS INFORMATION

Tags: Advance Rulings, GST, Judgement


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cslalitrajput

Lalit Rajput is a qualified Company Secretary and graduate with 5+ years’ experience in handling Secretarial and Compliance management. Working as Proprietor at Lalit Rajput &Associates, Company Secretaries and Compliance Head at EDUXGURU. Key areas include handling Compliances related to Secretarial, Start-ups, SEBI, FEMA, Labour Laws, GST, NCLT, IPR, MCA/ROC, RTA etc. He has started his career in Adventz Group with one of leading EPC Company, Kalindee Rail Nirman - A Div. Of Texmaco Rail & Engineering Limited (erstwhile known as Kalindee Rail Nirman (Engrs.) Ltd.) and after that worked with Outcome Solutions & Services LLP, a Risk Advisory firm and S. Srinivasan & Co.,Leading Company Secretaries firm in Mumbai and Chennai. He is also an active blogger/Author at many platform and has written various articles on: Taxguru, Compliance Calendar LLP, Studycafe, Caclubindia, Casansaar, theTaxTalk, Lawyer’s Connect, IPleaders, Governance Professionals, Lawyers club India, Dealout Professionals and many more. He has also blogger at ENLIGHTEN GOVERNANCE and contributed articles in ICSI E-Corporate Manager published by ICSI Ahmadabad Chapter.

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