A brief discussion about whether GST leviable on director's remuneration or not?

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Analysis on applicability of GST on Director's remuneration on Reverse charge basis (i.e. Whether GST should be charged on remuneration paid by company or body corporate to director on the services provided by such director)


As per provisions of schedule III to the CGST Act, 2017, activities/ transactions which shall not be treated as supply of goods or services. One of the activities is services by an employee to the employer in the course of or in relation to his employment.

Now the question is what is the definition of employee under GST, but there is no definition of employee described under GST Act. Hence, we have to understand in common parlance.

As per section 62(1)(b) of the Companies Act, 2013, definition of employee covered “a director of the company whether a whole-time director or not (i.e. part time director) but excluding an independent director.

As per notification No. 13/2017-C.T. (Rate), dated 28-06-2017 as amendment to section 9(3) of the CGST Act, 2017, list of notified services that will be charge under RCM, and one of the notified service is “service supplied by a director of a company or body corporate to such company or body corporate”.

Now let us understand the Advance Ruling under GST,

  1. In the ruling of M/s Alcon Consulting Engineers (India) Pvt. Ltd., Karnataka, the remuneration paid to the Director of the applicant company is liable to tax under reverse charge mechanism under section 9(3) as described above. (to refer case click on link http://gstcouncil.gov.in/sites/default/files/ruling-new/KAR_AAR_83_2019_25.09.2019_ACEIPL.pdf)
  2. In the ruling of M/s Clay Craft India Pvt. Ltd., Rajasthan, the remuneration paid to the Director of the applicant company is liable to tax under reverse charge mechanism under section 9(3) as described above. (to refer case click on link http://www.gstcouncil.gov.in/sites/default/files/ruling-new/RAJ_AAR_33_2019-20_20.02.2020_CCIPL.pdf)
  3. In the ruling of M/s Anil Kumar Agrawal, Karnataka, the remuneration paid to director is liable to GST or not, is depend upon terms & conditions of appointment. (to refer case click on link https://gst.kar.nic.in/Documents/General/AAR_Anil_30.pdf)

a.      The first possibility is remuneration paid to director is not chargeable to GST - if the director is appointed in the company as an executive director, in which case the services of the director to company neither treated as supply of goods nor supply of services, in terms of Schedule III of CGST Act, 2017.

b.       The second possibility is remuneration to director is chargeable to GST as per entry no. 6 of notification 13/2017-Central Tax (Rate) dated 28.06.2017 - if the director is appointed in the company as non-executive director,

As per latest circular no. 140/10/2020 – GST issued by Ministry of Finance (CBEC), New Delhi, dated on 10th June, 2020 that GST chargeability on director’s remuneration is depend on terms of appointment of director irrespective of name and designation of directors.

If it is ascertained that director is appointed as employee and TDS deducted on director’s remuneration u/s 192 of Income Tax Act, 1961 then schedule III of CGST Act is attracted hence there is no chargeability of GST by the Company under reverse charge mechanism on such remuneration.

On the other side if director is appointed as professional and not as an employee and TDS is deducted on such remuneration u/s 194J of Income Tax Act 1961, then schedule III of CGST Act is not attracted hence GST should be chargeable by company on reverse charge mechanism on such remuneration.


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