GST on Director Remuneration Calculator
Determine whether the payment made to your director is classified as Salary (No GST) or Professional Fees (18% RCM).
GST Implications
Frequently Asked Questions
Understanding RCM on Director Remuneration.
Is GST applicable on salary paid to a Director?
No. If the director is a whole-time director or a managing director and is treated as an employee of the company (TDS deducted under Section 192 of Income Tax Act), their remuneration is considered a "Salary". Under Schedule III of the CGST Act, services by an employee to the employer are neither a supply of goods nor services. Thus, no GST applies.
When is GST applicable on Director Remuneration?
GST is applicable if the director is an independent director or non-executive director, and the payment is for professional services, sitting fees, or commission. If TDS is deducted under Section 194J (Professional Fees) of the Income Tax Act, GST applies.
Who pays the GST on Director Remuneration?
The company pays the GST under the Reverse Charge Mechanism (RCM). The director does not need to register for GST or charge it on their invoice. The company must pay the GST in cash and can claim ITC later.
What is the GST rate on Director Sitting Fees?
The applicable GST rate on director sitting fees and professional remuneration is 18%. It must be paid by the company under RCM.
Can the company claim Input Tax Credit (ITC) for the RCM paid?
Yes, the company can claim ITC for the GST paid under RCM on director remuneration in the same month's GSTR-3B, provided the company is eligible to claim ITC (not making exempt supplies).
What if TDS is deducted under Section 192 and 194J both?
The part of the remuneration declared as salary (Sec 192) will not attract GST. The part declared as professional fees or sitting fees (Sec 194J) will attract 18% GST under RCM.
Do Independent Directors need to obtain GST registration?
No. Since the tax on their services is entirely payable by the company under RCM, independent directors are exempt from taking GST registration solely for this purpose.
How do I report Director RCM in GSTR-3B?
The company must report the liability in Table 3.1(d) (Inward Supplies liable to reverse charge) and claim the corresponding ITC in Table 4(A)(3).
Are commissions paid to directors subject to GST?
Yes, commissions paid to non-executive or independent directors are treated as professional fees and attract 18% GST under RCM.
What if the company is not registered under GST?
Under Section 24 of the CGST Act, a person required to pay tax under reverse charge must mandatorily obtain GST registration, regardless of their turnover. The company must register and pay the RCM.