Remuneration paid to directors to attract GST: AAR

Companies will have to pay GST on the remuneration they dole out to directors, the Authority for Advance Ruling (AAR) has said.

In an application filed before the Rajasthan bench of the AAR, Clay Craft India Pvt Ltd had sought clarification on whether salaries paid to directors would attract Goods and Services Tax.

The company said its directors are working as employees for which they are being compensated by way of a regular salary and other allowances.

"The company is deducting TDS on their salary and PF laws are also applicable to their service. Therefore, in all practical purposes these directors are the employees of the company and are working as such besides being Director of the company," it said.

In its ruling, the AAR said, "the consideration paid to the directors by the applicant company will attract GST under reverse charge mechanism..."