Appointment of director as a consultant

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ankit (Querist)

20 June 2017 Hello Everyone..

Under Service Tax and GST it is mentioned that Services provided by Director to the Company are covered under Reverse Charge Mechanism.
But what type of service director provides to the company because director are considered as employee of the company or else he can be appointed as a consultant also in the company for rendering professional service.

Pls. share something in written If a Director can be appointed as a consultant in the company instead of employee .
Please clarify ..?
urgent basis..
Thanks

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

20 June 2017 Full time directors are employees of the company no GST payable on the remuneration paid to such directors. GST payable under RCM on payment to independent/non executive directors.

ankit

ankit (Querist)

20 June 2017 ok
But is this provision apply on private limited company also..
I know Reverse charge is applicable on each type of company but can a private limited appoints its executive director as a consultant..?
pls clarify in case of private limited company..

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

20 June 2017 Yes private limited company can appoint its executive director as a consultant.

ankit

ankit (Querist)

20 June 2017 Sir, Thanks a lot for Instant Reply..
But it would be great if you can share something in written because have to show this to my seniors ..i am not on internet.
According to them whatever company pays to executive director will come under remuneration..
But my point is in service tax and GST no where its mention about executive director or independent director or non executive director..
only director word is mention..so an executive director can be a consultant in pvt ltd company..?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

20 June 2017 Directors are office holders but that does not automatically make them employees. For that a separate service contract is needed. What they do as directors and what they do as employees may have overlaps but may not be the same. It is a fine distinction but it is there. It may sometimes be difficult to show that distinction and in the circumstances we have here, I think the Revenue, and most people, would find it difficult to see how the directors can be self employed. However, go one stage further and find someone who is self employed and a specialist in a particular field. She or he may accept a directorship, and continue with that profession and charge for work done in the guise of the professional.
I am one of the two directors of a software company. We both receive only consultancy fees.

See the link.
https://www.accountingweb.co.uk/any-answers/directors-consultancy-fees

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