This article presents details about GST on directors remuneration, GST on sitting fees, commission and so on. <\/p>\n\n\n\n
Contents<\/p>
Under section 9(3) of CGST Act & section 5(3) of IGST Act<\/strong>, the government has the authority to notify the levy of GST on RCM basis on goods and services.<\/p>\n\n\n\n According to the government notification through entry no. 6 of Notification No. 13\/2017- Central Tax (Rate) dated 28th June 2017 & entry no. 7 of Notification No. 10\/2017- Integrated Tax (Rate<\/strong>) dated 28th June 2017<\/strong>, any services provided by a director of a company to the concerned company would come under reverse charge.<\/p>\n\n\n\n Section 2(102) of CGST Act has given the definition of \u201cServices\u201d <\/strong>as:<\/p>\n\n\n\n \u201cservices\u201d means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.<\/p>\n\n\n\n So, according to the notification by the government- the tax on services provided by the director would be payable on reverse charge. Means the sitting fees, commission and the services charges for providing a guarantee for a loan granted to the company etc comes under reverse charge so there is liability of GST on directors remuneration.<\/p>\n\n\n\n As per the GST Law, The Section 9(3) and Section 9(4) of the CGST Act constitutes the provisions related to reverse charge applicability<\/a>. According to these provisions, there are mainly two cases where the RCM is applicable which are as follows:<\/p>\n\n\n\n In the first case, the liability to pay tax falls on the recipient side means the one who receives the services and not the one who supplies the services. Under section 9(3), the liability to pay tax is on the company who receives the services (recipient company), no matter even if the turnover from director\u2019s services is more than INR 20 lakhs or 10 lakhs.<\/p>\n\n\n\n As per notification no. 5\/2017 \u2013 Central Tax dated 19th June, 2017, Government has mentioned that the individuals, who are engaged in making supplies of only taxable goods or services or both, the total tax on which is subject to reverse charge basis by the receiver of such goods or services or both under sub-section (3) of section 9 of the Act, are exempt from mandatory registration under the Central Goods and Services Tax Act, 2017 (12 of 2017).<\/p>\n\n\n\n According to section 24(iii) of CGST Act, a person who needs to pay tax under RCM must be mandatorily registered regardless of the limit of its turnover which implies that:<\/p>\n\n\n\n The applicability of IGST, CGST and SGST<\/a> that is liable on reverse charge services depends on the place of supply for such services & the place of the supplier of services.<\/p>\n\n\n\n Place of supply & the place of the supplier <\/strong>of services, both, hold an utmost value, as where IGST is applicable on inter-state supplies and CGST and SGST are applicable on intra-state supplies, the tax has to be paid in the state where supply takes place, and so contributes to that particular state government\u2019s revenue.<\/p>\n\n\n\n The principles of determining the nature of supply (i.e. interstate supply or intrastate supply) remain the same in case of RCM as well, since the government has merely chosen the recipient of goods\/services as the point of convenience from the point of view of better compliance with the law.<\/p>\n\n\n\n Interstate and Intrastate Supply <\/strong><\/p>\n\n\n\n Section 7 and Section 8<\/strong> of the IGST Act defines the inter-state and intra-state supply <\/strong>respectively. According to these sections, the transaction is, an inter-state supply when the place of the supplier and supply are different and not located in the same state or UT, and an intrastate transaction when the place of the supplier and supply are located in the same state or UT.<\/p>\n\n\n\n Place of supply<\/strong><\/p>\n\n\n\n According to Section 12(2)(a) of the IGST Act, the place of supply is the location where the services are provided or received.<\/p>\n\n\n\n As far as the director\u2019s service is concerned, it is served to the board of the company. The board refers to the supreme body of corporate administration. So here the place of supply is the place where the board of the company is located, where directors\u2019 services are supplied.<\/p>\n\n\n\n In general, it is the registered office of the company. But in some cases, it is the place from where the company is ruled or controlled. For instance when the companies register their offices at distant places or remote locations like factories, tea gardens, the original place of its formation, etc. In such cases, the location where important board meetings take place or the place where high-level management is situated in the place of corporate administration.<\/p>\n\n\n\n Note:<\/strong> It excludes the place if management has conducted a meeting at a holiday spot for a change. The common or usual place of corporate governance will still be considered as the place of supply.<\/p>\n\n\n\nWho has to Pay the GST?<\/span><\/h2>\n\n\n\n
Is it Mandatory for Directors to be Registered under GST?<\/span><\/h2>\n\n\n\n
Nature of Transaction for Applicability of GST on Directors Remuneration<\/span><\/h2>\n\n\n\n