Professional/Technical Fee paid to Whole-time Director also to attract GST
The Finance Ministry on Wednesday cleared the air on remuneration paid to independent director and remuneration other than salary to employee director and said that these will attract Goods & Services Tax (GST).
The payments will be charged GST at the rate of 18 per cent.
According to a circular issued by the Central Board of Indirect Taxes and Customs (CBIC), the policy making body for indirect taxes under the Finance Ministry, the issue of remuneration to directors has been examined under two different categories. The first one refers to independent directors and second one includes whole-time directors, including Managing Director, who are employees of a company. Accordingly, norms have been finalised.
“In respect of such directors (independent director) who are not the employees of the said company, the services provided by them to the company, in lieu of remuneration as the consideration for the said services, are clearly outside the scope of Schedule III of the CGST Act and are therefore taxable,” the circular said. Further it was said that it will be the responsibility of the company to discharge the applicable GST on reverse charge basis. It is just like a registered merchant responsible for collecting GST and depositing with the Government while dealing with unregistered business.
For whole-time director, including Managing Director, working as employee of a company, the remuneration can be divided into two parts. “The part of Director’s remuneration which are declared as ‘Salaries’ in the books of a company and subjected to TDS (Tax Deducted at Source) under Section 192 of the IT (Income Tax) Act, are not taxable being consideration for services by an employee to the employer in the course of or in relation to his employment in terms of Schedule III of the CGST Act, 2017,” the circular said. It means there is no GST on this component.
However, the part of employee Director’s remuneration, which is declared separately other than ‘salaries’ in the company’s accounts and subjected to TDS under Section 194J of the IT Act as Fees for professional or Technical Services, shall be treated as consideration for providing services which are outside the scope of Schedule III of the CGST Act, and is therefore, taxable. Here, it will be responsibility of the company to collect GST and deposit with the Government.
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Published on
June 10, 2020
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