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Since the inception of Goods and Services Tax (‘GST’) in 2017, leviability of GST on director’s remuneration has been an ambiguous subject. The question lies in whether services provided by the director to a company is required to be treated as ‘services by an employee to the employer in the course of or in relation to his employment’ under Schedule III (i.e. neither supply of services and/or goods) of the Central Goods and Services Tax Act, 2017 . (the ‘CGST Act’) or the same is to be treated as ‘supply of services’ and made taxable in the hands of the Company through reverse charge under the Act.

The issue was first considered by Authority on Advance Rulings in the State of Karnataka in the case of M/s Alcon Consulting Engineers (India) Pvt. Ltd. , wherein the authority ruled that remuneration paid to the directors is to be treated as supply of service and thereby subjected to GST under Reverse Charge as the same is specifically covered under item 6 of the Notification No 13/2017 – CT. Likewise, the Authority on Advance Ruling in the State of Rajasthan was of a similar view in the case of Clay Craft India Private Limited.

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