TMI BlogGST on Director’s RemunerationX X X X Extracts X X X X X X X X Extracts X X X X ..... GST on Director’s Remuneration - By: - CA.VINOD CHAURASIA - Goods and Services Tax - GST - Dated:- 11-9-2017 - - Introduction: This article discusses in detail about GST on Services of director i.e. sitting fees, commission etc. Taxability The government has power u/s 9(3) of CGST Act u/s 5(3) of IGST Act, to notify the levy of GST on RCM basis on goods or services. Vide entry no. 6 of notification no. 13 of CGST dated 28 th June 2017 entry no. 7 of notification no. 10 of IGST dated 28 th June 2017 , Government had notified that any services supplied by a director of a company to the said company would be covered under reverse charge. Below are the related links. Notification No. 13/2017-Central T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (Rate) New Delhi, the 28 th June, 2017 Notification No. 10/2017-Integrated Tax (Rate) New Delhi, the 28 th June, 2017 The relevant portion of the notifications is as below: Sl.No. Category of Supply of Services Supplier of service Recipient of Service (1) (2) (3) (4) 7 Services supplied by a director of a company or a body corporate to the said company or the body corporate. A director of a company or a body corporate The company or a body corporate located in the taxable territory. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per section 2(102) of CGST Act, 2017 , services 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 . Accordingly it may be construed that services of director, like: sitting fees, commission, services charges for giving guarantee for loan taken by company has been covered under the Government notified services on which the tax would be payable on reverse charge. Person liable to pay GST Under the GST Law, provisions related to applicability of reverse charge are gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the Section 9(3) and Section 9(4) of the CGST Act . Therefore, there are two cases in which the RCM is applicable: Supplies notified by Government u/s 9(3) Taxable Supplies by unregistered person to registered person In case of RCM, the liability to pay tax is on the recipient of supply of goods and services instead of the supplier of such goods or services in respect of notified categories of supply. As the director s services are covered under section 9(3) , the liability to pay tax is on the recipient company despite of the fact the turnover from director s services exceeds ₹ 20L or 10L. Are directors are liable for GST registration ? As per notification no. 5/2017 Central Tax dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 19 th June, 2017 , Government has specified that the persons who are only engaged in making supplies of taxable goods or services or both, the total tax on which is liable to be paid on reverse charge basis by the recipient of such goods or services or both under sub-section (3) of section 9 of the said Act as the category of persons exempted from obtaining registration under the aforesaid Act. Related notification link is as below: Notification No. 5/2017 Central Tax New Delhi, the 19 th June, 2017 However, as per section 24(iii) of CGST Act, a person who is required to pay tax under RCM, shall be required to be registered compulsorily irrespective of its turnover. In view of the above, it may be construed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat: The directors of the company are exempted from taking GST registration provided they providing only such services on which Tax is to be paid on RCM basis by the recipient of such services. The company being required to pay tax on RCM basis, is required to get registered compulsorily irrespective of its turnover size. Nature of Transaction IGST or CGST SGST that would be charged on such reverse charge services depending upon place of supply for such services location of such supplier. Determination of place of supply is of huge importance because, inter-state supplies are subject to IGST and intra-state supplies are subject to CGST and SGST. Tax needs to be paid in the state where supply takes place, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reupon which it would land up in the hands of destination state government. The principles of determining the nature of supply (i.e. inter state supply or intra state 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. Section 7 of the IGST Act states that where the location of the supplier and the place of supply are located in two different states or UTs, the transaction shall be an inter-state supply. Section 8 of the IGST Act states that where the location of the supplier and place of supply are located in the same state or UT, the transaction will qualify as an intra-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate transaction. Place of supply Section 12(2)(a) of the IGST Act determines place of supply as the location of person where the services are received. A director services on the board of the company. The board is the supreme body of corporate governance. Therefore, it can be said that the place where directors services are being consumed is the place where the board of the company is situated. It is place where key management and commercial discussions that are necessary for the conduct of the business of an entity as a whole. Generally, the place of registered office of the company is such place. However, in many cases the registered office is not at the place from where the company is effectively governed whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n companies have opted to register their offices in remote locations, say factories, tea gardens, original place of its formation, etc. Therefore, in such cases, the place where most of the substantive board meetings are held or the place where the apex management is seated should be the place of corporate governance. It is to be understood that Board meeting is not a matter of travel or tourism interest. The directors may be meeting, say at a place other than the place of corporate governance. They may meet, for a change, at a holiday destination. However, the meeting is for discussion of matters of corporate governance. The discussions held in board meeting is not restricted to a particular place but governing decisions are taken for b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enefit of entity as whole. Therefore, no matter where they meet, the meeting still discusses matters pertaining to the company, and therefore, the usual place of corporate governance should still be taken as the place of supply. Location of supplier in case of director services As per section 2(15) of IGST Act , location of the supplier of services means,- (a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business; (b) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; (c) where a supply is made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provisions of the supply; and (d) in absence of such places, the location of the usual place of residence of the supplier. So, in case of director services, the location of supplier is the place where his usual place of residence is situated since such directors does not have any registered office. Self invoicing in case of RCM Section 31(3)(f) of the Act lays down that a registered person shall issue an invoice in respect of goods or services or both received from: supplies covered u/s 9(3) and unregistered suppliers covered u/s Sec 9(4). There i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no specific format released by the council for such invoices but the same need to be in compliant with the mandatory contents provided in Rule 46 of the CGST Rules. Also when payment is made to such person, there is a need to issue payment voucher for documenting the transaction, the format of which is provided in Rule 52 of the CGST Rules. ------ The author is a practising CA based in Delhi and is registered Insolvency Professional. He can be reached at cavinodchaurasia@gmail.com , Mob. +91 9953587496. - Reply By Indian Commerce as = Hi, If the Sitting fee, commision included as salary to the whole time Director, still GST applicable under RCM?? Dated: 11-9-2017 Reply By CA.VINOD CHAURASIA as = Any amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which TDS u/s 192b , GST is not applicable Dated: 11-9-2017 Reply By Indian Commerce as = Yes, except sitting fee, all other amounts paid covered under 192B . Sitting fee paid under 194J , that means GST has to pay by the company under RCM for sitting fee?? Am I correct? Dated: 11-9-2017 - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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