director commission, Goods and Services Tax - GST

[Madhavan iyengar]

A working director ie as a employee receives commission and not salary from a company is this commission paid liable for reverse charge

another case working director ie as a employee, receives salary and commission in this case is rcm applicable on commission paid by company

Posts / Replies

[Alkesh Jani]

Sir,

My point of view is that, in terms of Section 24(vii) of CGST Act, requires compulsory registration i.e. in this case, two services are rendered one as a Director of the company and second as commission agent. Only services provided by the Director to the company is covered under RCM. Further, if no salary is received than it is very difficult to prove employee and employer relationship.

Further, If a person is registered under GST, the liability to pay tax arises on supply of goods and/or services, regardless of turnover. Therefore, Director of the company is required to obtain registration and GST is payable on the commission received by him.

Thanks,

With Regards

[KASTURI SETHI]

I support the views of Sh.Alkesh Jani Ji. I further add that how to prove employer-employee relationship depends upon the terms and conditions mentioned in the appointment letter. Terms and conditions will determine whether Director is employee or not.

[Ganeshan Kalyani]

In my view in both the cases RCM is not applicable as there is employer employee relationship. The employment agreement will speak about the relationship between director and the company if they are employer employee or not. Salary is generally paid in two forms to director, one is as fixed salary and second is flexi component I.e. commission based on the company performance .

[DR.MARIAPPAN GOVINDARAJAN]

If the Director is not an employee of the company and gets commission, then the company is liable to pay tax under RCM.

The director receiving salary and commission will come under the relationship of employer and employee. No tax is payable.

[Alkesh Jani]

Sir,

Sorry to differ with the views expressed by Sh. Ganeshan Kalyaniji, as the same has to satisfy the definition of mixed or composite supply, however, in the instant case, the taxable event, time of supply and classification of services are independent in nature and are required to be treated accordingly. Further, employee employer services are neither supply of service (Non-GST), if the above views are accepted than any amount paid will be out of scope of GST.

Thanks,

With Regards.

[Madhavan iyengar]

Dear Sirs

Very good deliberations the following principles are laid down as per gst law

first is if director is working in capacity of employee then

In terms of

SCHEDULE III

[See section 7]

ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES

1. Services by an employee to the employer in the course of or in relation to his employment.

If the director is held as employee then all payments made to him by the company can it be held as salary since commission is calculated separately but it is arising of his contractual terms with company

For RCM Purpose in terms of Reverse charge notifications Services supplied by a director of a company or a body corporate to the said company or the body corporate

In above case director is supplying service not in capacity of employee

In light of above experts please further elaborate

so our contention that commission should not be liable for RCM if the commission is received in capacity of an employee

[DR.MARIAPPAN GOVINDARAJAN]

If the director is not an employee and gets commission then RCM is applicable.

[KASTURI SETHI]

Dear Sir,

Pl. note your words, "---------------- but it is arising of his contractual terms with company". It is is dual function. Dual capacity. Commission is taxable under RCM. I concur with the views of Dr.Mariappan Govindarajan, Sir.

[Ganeshan Kalyani]

Yes there should be an agreement between the company and the director proving that they have employer employee relationship.