New Delhi, IANS. Payment of professional fees and remuneration to directors of companies will now be subject to Goods and Services Tax (GST). The government is working to address the shortcomings of the taxation system to increase collections. The Central Board of Indirect Taxes and Customs (CBIC) has stated in a circular that the payment made by companies to independent directors or non-executive directors (not employees of the company) will be subject to the applicable GST rate.
The CBIC has stated that companies will deduct tax on reverse charge basis on payments made to such directors for their service.
Apart from this, remuneration paid to full-time directors or directors who are also employees of the company will also be subject to GST conditional.
This means that directors, full-time directors, managing directors, who are also on the rolls of a company and take salary, will be subject to GST if they receive any kind of remuneration which is not of the nature of salary. However, there will be no GST on the salary paid to such directors.
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Cyril Amarchand Mangaldas partner, Mekhala Anand said, “This clarification explaining the nature of remuneration paid to directors under various laws, will provide an unprecedented clarity to companies entangled among diverse AAR ruleings.” The solution to this issue will give the right signal to the industry, which is focusing on regaining its momentum after the Kovid-19 crisis.
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