This article explains the proposition of Director’s Remuneration which has many disputes around it.

GST has its inception in 2017, the state of ambiguity and perplexity in every citizen’s mind is due to the implications of GST under the director’s remuneration. Is the service provided by the company’s director is either considered as a service or supply of goods under schedule III of the central goods and services Tax act of 2017? The best GST consultants in Chennai are here to depict the fact of this confusion. As per the say of the finance ministry, the remuneration paid to an independent director would liable for Goods and Services Tax. 18% of the payment is considered a chargeable amount of GST under the reverse charge mechanism.

The ruling central government cleared the confusion eventually CBIC released a circular on this issue. This circular will solve the questions raised by many applicants and petitioners. Let’s know what the questions are:

1. Is the GST is payable under the reverse charge mechanism for the remuneration paid to the director?

2. If the director is working in another company as well, what will be the applicable GST?

GST under RCM:

According to Schedule III of the CGST act of 2017, the salary paid by an applicant to the director falls under Entry no.1. It states that the director is not an employee of the company. Supply of the service provided by a director is subjected to pay by the applicant under section 29(3) of CGST 2017. As mentioned in the above lines the applicant is responsible to pay the GST under RCM- Reverse Charge Mechanism. Here the provider of service is the director and the recipient is the applicant’s company, the salary is paid by the applicant and so the GST. The applicant is liable to pay GST under RCM under entry number 6.

Circular provided by CBIC:

The circular is based on the directors of the companies. There are two categories of directors:

1. Directors who are not employees of the company are known as the “Independent Directors.”

2. Full-time directors are considered as the employees of the Company.

For Independent Directors:

            A company can appoint an independent director only if he had not been an employee in that particular company for a minimum of 3 years. The part-time director is not considered as a director of a company whereas he is eligible to get his pay from the company. The salary provided by a company is liable to pay the GST.  The liable GST is paid under the reverse charge mechanism. The independent employees are not considered as an employee, but it is a must to look at the service provided by such directors. However, this should be done because the payments are accounted for in the records of the company.

Full-time directors:

            A director has the potential to work both as a director and an employee of the company. The payment to the directors is recorded as salaries in the book of accounts. The salary is eligible to pay GST under TDS, section 192. TDS has been deducted for such salaries so no GST is applicable under section 194-J. if the salary is not recorded as salary in the accounts book then the company is liable to pay GST under RCM. In the circular, it was mentioned clearly about the responsibility of the company to handle this kind of issue, collect the GST and deposit to the government.


The above words, written by the best consultants in Chennai, states that if the accounts book recorded the payment as salary, it is liable to deducted under TDS under section 192 of GST. The payment other than the salary is eligible to fall under the GST under RCM. This is under section 194J of the Income-tax Act of 1961. However, the circular failed to explain the refund of tax paid by the companies and applicants. The circular is mainly furnished to clear the issues. Hope the implications of GST under the Director’s remuneration are fully explained clearly by the top tax consultants in Chennai.