• Clay Craft India Private Limited (‘the Applicant’) had six Directors on their Board, who along with performing their duties as directors were also working as employees at different levels (i.e., procurement of raw material, Production, quality checks etc.)
• The Applicant compensated the Directors in the form of salary and commission for their services as an employee and director respectively. The compensation paid to the Directors was as per the Company’s internal policy and the employment contract
• The Company deposited Goods and Services Tax (‘GST’) under the Reverse Charge Mechanism (‘RCM’) on the commission paid to the Directors. However, on the salary component, the Applicant deducted TDS under the Income Tax law and undertook relevant PF compliances, but no GST was deposited

• Whether GST is payable under the RCM on the salary paid to the Directors of the Applicant under the employment contract?
• Whether the answer to the above question would change if the Director is also a part time director in another company?

• The entry no. 1 of Schedule III to the Central Goods and Services Tax Act, 2017 (“the CGST Act”) provides that services by an employee to the employer in the course of or in relation to his employment, would not be construed as a supply of goods/ services
• The above mentioned Entry No. 1 of the Schedule III of the CGST Act, 2017 does not cover the services provided by the Directors as the Directors are not the employees of the Company
• Consideration paid to the Directors for supply of services is specifically covered under the entry no. 6 of the Notification No. 13/2017 – Central Tax (Rate) dated 28 June 2017 (“the Notification”), which stipulates that the a company or body corporate is required to pay GST under RCM on the receipt of services from their Directors

Accordingly, services rendered by the Directors for which a consideration is paid to them in any head would be liable to GST under the RCM.

The answer will remain same even in the case where the Director is also a part time Director in any other Company