FAQ’s on GST liability on Director of Company
1)
Who are Directors of a company?
The directors are
the persons elected by the shareholders to direct, conduct, manage or supervise
the affairs of the company. According to Sec. 2 (13) of the Companies Act, “Director
includes any person occupying the position of director by whatever name
called.”
2)
What do you mean by an independent director?
Section 2(47) of the Companies Act states that an ‘independent director’
means an independent director referred to in Section 149(6). Section 149(6)
provides with a descriptive list of qualifications of an independent director.
3)
Can an employee be appointed as an independent
director of the company?
Independent
director cannot be an employee, proprietor or a partner of the said company, in
any of the 3 financial years immediately proceeding the financial year in which
he is proposed to be appointed in the said company.
4)
What do you mean by a whole time director?
“Whole-time
Director” includes a director in the whole-time employment of the company. The
definition of ‘whole-time director’ is an inclusive definition, so he may not
be an employee of the company too.
5)
What do you mean by a managing director?
The Board of Directors
generally appoints one of its members to manage the affairs of the company as a
whole time officer and calls him the Managing Director. The Managing Director
occupies a position of dual authority and responsibility. As a director, he
attends the Board meetings and, as a manager, he performs the managerial
functions.
6)
What is an important test to determine whether GST is
leviable on services provided by directors?
The following criteria needs to be fulfilled in order to not constitute as
a supply under GST:-‘
a. Employer-employee
relationship (master servant relationship)
b. TDS is deducted
u/s 192
c. It should be a
contract of service and not a contract for service
7)
How are services provided by a whole time director to
a body corporate covered under GST?
Here, it is essential to note whether the services provided by the whole
time director are in accordance of a contract of employment or not.
a) If the whole time
director is working according to a contract of employment, services provided do
not constitute as a supply under GST. Hence, not taxable.
b) If the whole time
director is not working according to a contract of employment, services
provided constitute as a supply under GST. Consideration received by the
director is taxable on RCM basis in the hands of the company
8)
How are services provided by an independent director
to a body corporate covered under GST?
Services provided by an independent director constitute as a supply under
GST as there is no employer-employee relationship. Consideration received by
the director is taxable on RCM basis in the hands of the company.
9)
Mr. A is a director employed by XYZ Pvt Ltd under the
terms of an employment contract. Mr. A received salary of Rs 10 lakhs during
the year. Is this consideration taxable under GST?
Services provided
by Mr. A are in terms of the employment contract. There is employer-employee
relationship in this case. These services will not be considered as supply
under GST. Hence, not taxable.
10)
How are services provided by a managing director to a
body corporate covered under GST?
It is essential
to find out whether the services provided by the managing director are in
accordance of a contract of employment or not.
a) If the managing
director is working according to a contract of employment, services provided do
not constitute as a supply under GST. Hence, not taxable.
b) If the managing
director is not working according to a contract of employment, services
provided constitute as a supply under GST. Consideration received by the
director is taxable on RCM basis in the hands of the company.
11)
What is the GST payable on services provided by
directors when they constitute as a supply under GST?
GST Rate payable
by receiver (company or body corporate) is 18%.
12)
Who can avail the benefit of Input Tax Credit (ITC)
on services provided by a director to a company or body corporate?
a) The question of
availing ITC does not arise on cases which do not constitute as a supply under
GST (employer-employee relationships).
b) The recipient
(company or body corporate in this case) can avail ITC of GST amount that is
paid under reverse charge on receipt of services (cases where employer-employee
relationship does not exist)
13)
What is the
time of supply for supply of director’s services when they are covered under
RCM?
Time of Supply
shall be earliest of:-
a) the date of
payment as entered in the books of account of the recipient or the date on
which the payment is debited in his bank account, whichever is earlier
b) 61st date from
the date of issue of invoice
If it is not possible to compute time of supply using above method, the
time of supply shall be the date of entry in the books of account of the
recipient of supply.
14)
Mr. P is a director of ABC Pvt Ltd. On payment of
consideration to Mr. P, ABC Pvt Ltd deducts TDS u/s 192 of Income Tax Act (TDS
on salary). IS GST chargeable on this amount?
Services provided
by Mr. P are in terms of the employment contract. There is employer-employee
relationship, which is proved by the fact that TDS is deducted u/s 192. These
services will not be considered as supply under GST. Hence, not taxable.
15)
Mr. Q is a director of ABC Pvt Ltd. On payment of
consideration to Mr. Q, ABC Pvt Ltd deducts TDS u/s 194J of Income Tax Act (TDS
on professional fees). Is GST chargeable on this amount?
Services provided by Mr. Q constitute as a supply under GST as there is
not employer-employee relationship, which is proved by the fact that TDS is
deducted u/s 194J. Consideration received by the director is taxable on RCM
basis in the hands of the company.
GST council clears
proposal of Phased reduction in late fees for not furnishing GSTR-3B for tax
periods during July, 2017 - 31 Jan, 2020, provided THE PAYMENT & FILING OF
RETURNS IS DONE BETWEEN 01.07.2020 to 30.09.2020
Phase 1: Those with Nil tax liability to be charged NO
LATE FEES
PHASE 2: Those with tax
liability to be charges Rs500 per return, per month, instead of Rs10000 per
month, per return
GST council
clears the proposal to allow small taxpayers (below Rs5cr annual turnover) to
file their returns for Feb-June,2020 with 9% interest beyond 30June & at
18% Interest after 30 Sept
