New Delhi: The Central Board of Indirect Taxes and Customs (CBIC) has clarified that Goods and Servies Tax (GST) will not be levied on salaries paid to directors who are employees of the company.
“The part of director’s remuneration that are declared as ‘salaries’ in the books of a company and subjected to TDS under Section 192 of the IT 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 CBIC said.
However, the part of directors’ 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, CBIC said.
It further added that the recipient of the said services, i.E. The company, is liable to discharge the applicable GST on it on a reverse charge basis.
“Accordingly, it is hereby clarified that the remuneration paid to such independent directors, or those directors, by whatever name called, who are not employees of the said company, is taxable in hands of the company, on reverse charge basis,” the CBIC circular said.
The CBIC mentioned that in respect of such directors 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 are taxable.