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GST Update Directors Remuneration An Analysis with CA Rajender Arora | Directors Remuneration in GST

Published on 11 Apr 2020 / In GST

Director remuneration GST
Director Remuneration in private limited company
Remuneration of Directors in company law
Directors' Remuneration-An Analysis

• Applicability of GST on Directors’ Remuneration To Advance Rulings are there for the same subject Clay Craft P Ltd Rajasthan Authority for Advance Ruling Dt 20-3-2020 Alcon Consulting Engineers P Ltd, Karnataka Authority for Advance Ruling Dt 25-9-2019 Both these Rulings say that GST under RCM shall be payable on Directors Remuneration to be paid by Company.
• Just for Reference of Readers, Advance Ruling is applicable only the applicant who has sought and the jurisdictional officer.
• But it may have some persuasive value for understanding the stand taken by the department on a particular position of law. Some References have been taken from past to tread to future Circular No 115 Issued by CBIC on 31-7-2009 and one CESTAT Judgment of Aurangabad Bench in the case of Allied Blenders & Distillers P Ltd on 25-6-2018.
• Both of these documents are giving favourable view towards the assesse about the taxability of Directors’ Remuneration. Facts With respect to Allied Blenders & Distillers P Ltd on 25-6-2018 were similar to those mentioned Clay Craft P Ltd Rajasthan Authority for Advance Ruling Dt 20-3-2020.
• In Allied Blenders, assesse reiterated that it is paying salary to directors and deducting TDS under section 192 of the Income Tax Act, 1961, issuing salary certificate Form-16, complying with the provisions of PF laws also.
• Have filed form 32 with ROC stating that directors are employees of the company. Moreover Allied Blenders submitted that they have paid regular salary and not sitting fees in the sense that directors were attending some meetings and participating into some of the decision only.
• On the other hand, they were actually discharging the management function as entrusted to them as per companies act. Even, company has declared all these directors as their employees only with all statutory authorities. Circular 115 issued by CBIC also guides on the same lines.
It clarifies two pints-:
1) Managing Directors/Directors (Whole time or Independent) are been paid some remuneration in the form of commission but that shall not be considered as commission. And, would not be taxable as business auxiliary service. Hence no Service Tax.
2) Managing Directors\Directors (Whole time or Independent) are also paid salary in the shape of consultancy. It is further clarified that this also shall not be considered to be as management consultancy services.
Hence would not be chargeable to service tax. However, it also clarified that if directors are given any additional fees or consultancy charges for providing any other service that shall be chargeable to service tax separately.
• At present these no jurisprudence settled on this aspect of taxation. So, cue may safely be taken from the past settled legal principals and clarifications issued by the authorities itself. In the light of foregoing paras, it can be easily deduced that in GST era also, this position of law can be hold good.
• Moreover, if this matter reaches to the honorable High Court anywhere in the country would find the similar treatment as been dealt in earlier law.


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