The CBIC issued Circular No. 140/10/2020 - GST, dated 10th June 2020 to give clarification in respect of classification of Director's Remuneration as same under SCHEDULE III as "SERVICES BY AN EMPLOYEE TO THE EMPLOYER IN THE COURSE OF OR IN RELATION TO EMPLOYMENT" or its taxability under RCM as per Notification 13/2017 - Central Tax (Rate).
The services provided by Director, not being an employee of the company, in lieu of remuneration are outside the scope of SCHEDULE III and therefore covered under Notification 13/2017 - Central Tax ( Rate ), dated 28.06.2017, wherein the recipient of services i.e. company shall be liable to discharge liability under reverse charge ( RCM ).
If the Director is an employee of the company, the taxability needs to be determined in terms of the activities performed by the director in the course of employer-employee relation or under a contractual relationship.
a). The Director's Remuneration, so far as it is declared 'SALARIES' in the books of a company and subjected to TDS under Section 192 of the Income Tax Act 1961, shall be treated as consideration for services by an employee to the employer in terms of Schedule III of the CGST Act, 2017. Hence "NO GST IS APPLICABLE."
b). Director's Remuneration which is classified as other than 'salaries' and subjected to TDS under Section 194J of the Income Tax Act 1961, as "Fees for Professional or Technical Services" shall be treated as consideration for providing services which are outside the scope of SCHEDULE III, and accordingly shall be taxable under reverse charge basis by virtue of Notification No. 13/2017 - Central Tax ( Rate ), dated 28.06.2017.
SOURCE : CBIC Official Website ( Circular No. 140/10/2020 - GST, dated 10th June 2020 ).
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