APPLICABILITY OF GST ON DIRECTORS REMUNERATION
As per Section 9(3) of the CGST Act, tax shall be paid on reverse charge basis by the recipient of such service. The Central Government vide Central Tax (Rate) Notification No. 13/2017 dated 28th June 2017 notified few services on which tax has to be paid on reverse charge basis.
Under Entry 6 of the said Notification it is mentioned that services supplied by a director of a company or a body corporate to the said company or the body corporate (located in the taxable territory) this will fall under Reverse Charge Mechanism, i.e. the company have to pay tax on the consideration paid to director and is eligible for Input Tax Credit.
As per Clause I of Schedule III – Services by an employee to the employer in the course of or in relation to his employment is not be treated as supply of goods / services.
Hence, director of a company are not treated as employee of the company.
Based on the above provisions the AAR Bengaluru on 25th September 2019 decided the case of M/s. Alcon Consulting Enginers (India) Pvt. Ltd. and held that RCM is applicable on remuneration paid to the Directors of the Company.
Similar decision was given by the Rajasthan AAR on 20th February, 2020 in the case of M/s. Clay Craft India Pvt. Ltd. based on Section 9(3) of the CGST Act and Clause I of Schedule III. It was held that any consideration paid to Director of a company for the services provided under any head of taxation, the company will be liable to pay GST under RCM.
In some company the position of director is same as that of an employee i.e. TDS under Section 192B, PF, ESI, P. Tax is being deducted from their remuneration. The director is an Executive director in one company only and the remuneration being paid by that company. There is an ambiguity with regard to charging of GST on Directors Remuneration under RCM as one may treat the director as an employee of the company and Clause I of Schedule III will attract and hence no GST will be charged on payment of remuneration to directors.
To avoid any unwanted litigation in future we would suggest charging GST on Directors Remuneration under on Reverse Charge Mechanism i.e. to pay GST in cash and then claim the same amount under the head ‘Input Tax Credit’if company usually have output liability


Please feel free to contact us on 9836388555 or info@dcstax.in for more details and queries.

Comments

Post a Comment

Popular posts from this blog

THINGS TO KNOW FOR BUSINESS STARTUPS

Image
We are presenting a few basic points to be kept in mind before getting in the field of business. Before starting their own venture one must take proper care to decide on these three aspects very effectively: · RIGHT FORM OF BUSINESS · RIGHT ACCOUNTANT · RIGHT BANKER CHOOSING RIGHT FORM OF BUSINESS Choosing the right form of business is like laying the groundwork. On this decision depends the entire maintenance of your business from compliance point of view. Thus, making an appropriate choice of Form of Business is inevitable. Keeping the present scenario in mind we currently recommend the start up ventures to register themselves as private limited companies. Most of the newly startup ventures have finance as a hurdle and being a private limited company one can easily procure funds from friends or relatives by issuing them shares without loosing control over the business.. The major forms of business that any start up venture can opt for are as follows:
Read more

DCS Tax - Services We Provide

Image
1. Book keeping Service Kolkata Book Keeping & Accounting are the basic needs of any business concern. Day to day book keeping is very essential to ensure a regular check on the operations and also to manage the taxation and regulatory compliances. With the active and enthusiast professionals at Dudhoria Consultancy Services, you are relieved from the tedious book keeping job. Along with the on-site book keeping services we also provide you with the facilities of off-shore maintenance of books of accounts, Periodical MIS Reports. Accounting services include finalization of your books of accounts, drafting of annual accounts and various reports as per requirements of the management. The work will be headed by efficient and experienced accountants having expert knowledge of accounts and various accounting software. We also provide our clients with interim period accounts as per your needs and necessities. 2. Online Return Filing Service Kolkata The Income Tax
Read more

FREE CONSULTANCY FOR STARTUPS

Image
Now register your startup with us and avail free consultancy. To register yourself all you need to do is drop us a mail with the following details @ taxdcs@gmail.com or i nfo@dcstax.in Company's Name Contact Person Mobile Number Mail ID Upon registration you can book an appointment with our experts and get guidance in relation to your Startup, Registration of Company/LLP, Tax Planning & Complainces Drop us a mail:      taxdcs@gmail.com   or   log on to     www.dcstax.in Dudhoria Consultancy Services Pvt. Ltd. 56, Netaji Subhas Road, 4th Floor, Kolkata - 700001 Call us @ 9836388555 || 9830498417 Email: info@dcstax.in|| taxdcs@gmail.com | Web:  http://dcstax.in/
Read more