This circular provides clarity on whether GST is payable on remuneration paid by companies to their directors, by distinguishing between directors who are employees of the company and those who are not.

It clarifies that remuneration paid to independent directors or to directors who are not employees of the company does not fall under services by an employee to the employer as covered under Schedule III of the CGST Act. Such services are treated as taxable supplies, and the company receiving the services is required to discharge GST under reverse charge mechanism in terms of Notification No. 13/2017–Central Tax (Rate).

In respect of whole-time directors or managing directors who are employees of the company, the circular explains that directors may perform dual roles. The portion of remuneration treated as salary and subjected to TDS under section 192 of the Income Tax Act is considered as services provided in the course of employment and is not liable to GST. However, any part of remuneration paid in a capacity other than employment, such as professional or technical fees and subjected to TDS under section 194J of the Income Tax Act, is taxable under GST. In such cases also, the company is required to pay GST on reverse charge basis.

The circular aims to ensure uniform treatment of directors’ remuneration under GST law.