The rate of GST on directors salary or remuneration is 18%. Tax liability needs to be discharged by company on Reverse charge basis. So directors’ don’t need to take gst registration.
Is reverse charge is applicable for all the directors’ salary?
Two categories to understand GST on director’s salary:
1) If director is employee of the company – No GST – Because of Schedule III of GST act.
2) If director is not employee of the company – GST @ 18% to be paid by company on reverse charge basis.
When is director considered to be employee of the company?
Director is Whole time director or Managing director of the company. So director has to be registered as MD or WTD with Registrar of Companies.
In the books of accounts it is recorded as Salary and TDS u/s 192 is deducted under Income tax law.
PF, ESIC and other labour law related compliance has been done as similar done for other employees.
If these conditions are satisfied then GST will not be applicable.
What if the director has given his property on rent to the company and company is paying rent to the director?
Here, the director has not given the services as director, hence reverse charge won’t be applicable. Services are not considered in the capacity as director of the company. Though director may have to pay gst on forward charge basis (if other conditions are satisfied).
In the case of salary of Independent directors – GST on reverse charge is always applicable.
If TDS is deducted u/s 194J then GST liability has to be discharged by company @ 18% on reverse charge basis.