As we are all aware, the Rajasthan Authority for Advance Ruling in the case of Clay Crafts India Private Limited held that the directors are not employees of the company, therefore, remunerating paid to them will not cover under Schedule III of the CGST Act, 2017 (activities or transactions which shall be treated neither as a supply of goods nor a supply of services). Accordingly, remuneration paid to directors will be subject to levy of GST.

Now, in a recent ruling given by the Karnataka Authority for Advance Ruling (attached) in the matter of Anil Kumar Agarwal, held that remuneration received as an Executive Director is not includable in the aggregate turnover, hence, outside the ambit of GST.

It has further held that in case any remuneration is received as a non-executive director, such remuneration is liable to tax under reverse charge mechanism (i.e., the company will discharge liability under RCM).

Now, there are divergent views on the leviability of GST on remuneration paid to directors. Therefore, a detailed clarification is expected from the CBIC so that the confusion can be put to an end.

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