GST under RCM on fees or remuneration paid to director

Under the Goods and Services Tax (GST) regime in India, the government has implemented a reverse charge mechanism (RCM) for certain goods and services. This means that the liability to pay GST is shifted from the supplier of goods or services to the recipient of goods or services.

One of the services that is covered under RCM is the payment of fees or remuneration paid to directors of a company. As per the notification issued by the government, any person who is registered under GST and is liable to pay tax under RCM is required to pay GST at the rate of 18% on the amount of fees or remuneration paid to directors.

However, there are certain exceptions to this rule. If the company is a public limited company, the services provided by the director are exempt from GST under RCM. Additionally, if the total value of such services provided by the director to the company is less than Rs. 5,000 per day, then GST under RCM is not applicable.

It's important for businesses to comply with the RCM requirements for fees or remuneration paid to directors to avoid penalties and ensure accurate and timely filing of GST returns. Therefore, it's recommended to consult with a tax professional or a legal expert to get the latest updates and information on this matter.

Exemptions to the payment of GST under RCM on fees or remuneration paid to directors

There are certain exemptions to the payment of GST under RCM on fees or remuneration paid to directors. These exemptions include:

1. Public Limited Companies: If the company is a public limited company, the services provided by the director are exempt from GST under RCM.

2. Value of Services: If the total value of services provided by the director to the company is less than Rs. 5,000 per day, then GST under RCM is not applicable.

However, if the company is a private limited company or a partnership firm, and the value of services provided by the director exceeds Rs. 5,000 per day, then the company is liable to pay GST under RCM on the fees or remuneration paid to the director at the rate of 18%. It's recommended to consult with a tax professional or a legal expert to get the latest updates and information on this matter.

Consequences of non-compliance with the RCM requirements for fees or remuneration paid to directors

Non-compliance with the RCM requirements for fees or remuneration paid to directors can result in various consequences, including:

1. Penalty: If a company fails to comply with the RCM requirements, it may be liable to pay a penalty, which can be up to 100% of the tax amount due.

2. Interest: If a company fails to comply with the RCM requirements, it may also be liable to pay interest on the amount of tax due, at a rate of 18% per annum.

3. Legal Proceedings: If a company continues to be non-compliant, it may face legal proceedings, including prosecution and imprisonment.

4. Reputational Damage: Non-compliance with the RCM requirements can also result in reputational damage for the company, which can affect its relationships with customers, suppliers, and other stakeholders.

Therefore, it's important for companies to comply with the RCM requirements for fees or remuneration paid to directors to avoid these consequences. It's recommended to consult with a tax professional or a legal expert to ensure compliance with the applicable GST regulations.

Who is responsible for paying GST under RCM on fees or remuneration paid to directors?

Under the GST regime, both the company and the director are responsible for paying GST under RCM on fees or remuneration paid to directors. However, the liability to pay GST under RCM ultimately falls on the company that is making the payment to the director.

This means that if a company pays any fees or remuneration to its director, and the company is liable to pay GST under RCM, it must pay the GST on behalf of the director. The director is not required to pay GST on the fees or remuneration received from the company, as the liability falls on the company under RCM provisions.

It's important for both the company and the director to comply with the applicable GST regulations to avoid penalties and other consequences. It's recommended to consult with a tax professional or a legal expert to ensure compliance with the GST regulations related to fees or remuneration paid to directors.

GST under RCM on fees or remuneration paid to director FAQs

Here are some frequently asked questions related to GST under RCM on fees or remuneration paid to directors:

Q: Who is responsible for paying GST under RCM on fees or remuneration paid to directors?

A: The recipient of services (i.e., the company) is responsible for paying GST under RCM on fees or remuneration paid to directors.

Q: What is the rate of GST under RCM on fees or remuneration paid to directors?

A: The rate of GST under RCM on fees or remuneration paid to directors is 18%.

Q: Are there any exemptions to the payment of GST under RCM on fees or remuneration paid to directors?

A: Yes, if the company is a public limited company, the services provided by the director are exempt from GST under RCM. Additionally, if the total value of such services provided by the director to the company is less than Rs. 5,000 per day, then GST under RCM is not applicable.

Q: Is it necessary for the director to register under GST for the services provided to the company?

A: No, it is not necessary for the director to register under GST for the services provided to the company, as the liability to pay GST is shifted to the company under RCM.

Q: How can a company pay GST under RCM on fees or remuneration paid to directors?

A: The company can pay GST under RCM on fees or remuneration paid to directors by self-assessing the amount of tax and paying it through the GST portal.

Q: What are the consequences of non-compliance with the RCM requirements for fees or remuneration paid to directors?

A: Non-compliance with the RCM requirements for fees or remuneration paid to directors can lead to penalties and fines, and may also result in the cancellation of the company's GST registration. Therefore, it's important for businesses to comply with the RCM requirements and ensure accurate and timely filing of GST returns.