GST on Directors Remuneration

Directors remuneration is paid for the services offered by the Director of the concerned company. In this article, let us look at if GST applies to Directors remuneration paid by a company.

Directors Remuneration

Director is the head of a company or corporate body. The services offered by a director include that related to a company or body corporate. The following mentions the examples of services offered by a Director for payable remuneration:

• Sitting fees,
• Commission,
• Services charges for providing a guarantee for a loan taken by the company

Applicability of GST on Directors Remuneration

The Central Board of Indirect Taxes and Customs (CBIC) has clarified that GST is applicable on Directors Remuneration on reverse charge basis. When the reverse charge applies while filing the returns, the recipient of the service should pay taxes on the reverse charge. Hence, in the case of Directors Remuneration, the recipient of service, the company becomes liable for the payment of GST on Directors Remuneration.

Place of Supply

The taxpayer should determine the place of supply to calculate IGST or CGST and SGST. The supplier shall consider the place of supply where the delivery takes place. A director delivers services to the board of the company. The board is the highest body of corporate governance. For that reason, it can be mentioned that the place where directors’ services are being consumed is the place where the board of the company is located, its registered office.

In some cases, the registered office is not the place where management decisions or Board decisions are taken from. For instance, the Board could always decide to meet at a Corporate Office in a certain State. In such cases, the place where the substantive board meetings take place can be taken as the place of supply.

Click here to read on Place of Supply for Goods

GST Registration

Since GST is applicable on Directors Remuneration, are Directors of a company liable to obtain GST registration?

No, Directors of a company receiving the Remuneration are not liable to take GST registration. Merely providing Director services will not make a person liable for obtaining GT registration irrespective of turnover, as GST applies on reverse charge basis. However, the company receiving the services and liable to pay GST on reverse charge will have to obtain GST registration mandatorily irrespective of aggregate annual turnover.

Click here to know more about GST registration in India.