The Central Board of Indirect Taxes and Customs (CBIC) issued a circular clarifying that directors’ remuneration recorded as salaries in a company’s books and subject to TDS under Section 192 of the Income-tax Act is not taxable under GST.
The clarification is summarised below:
- Remuneration paid to an independent director, or to any director who is not an employee of the company, is taxable in the hands of the company under the reverse charge mechanism.
- Directors’ remuneration recorded as salaries in the company’s books and subject to TDS under Section 192 of the Income-tax Act is not taxable under GST because it is consideration for services provided by an employee to an employer in the course of employment under Schedule III of the CGST Act, 2017.
- Directors’ remuneration recorded under a category other than salaries and subject to TDS under Section 194J of the Income-tax Act as fees for professional or technical services is treated as consideration for services outside the scope of Schedule III of the CGST Act and is therefore taxable under GST.