GST : Finally, the dispute on Reverse Charge on Director’s Remuneration has been put to an end.
Finally, the dispute on Reverse Charge on Director’s Remuneration has come to an end.
The Government vide Circular No. 140/10/2020 – GST Dt. 10-06-2020 has clarified the applicability of RCM for directors.
The Circular has linked it with the TDS under Income Tax Act.
The Circular states that the Part of Director’s remuneration which are declared as “Salaries‟ in the books of a company and subjected to TDS under Section 192 of the Income Tax 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 Part of employee Director’s 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.
Hence the Company has to pay Tax under Reverse Charge Mechanism