Search Your Queries Related To Trilegal


Karnataka Authority for Advance Ruling: GST not payable on the remuneration paid to the executive directors

18 May 2020

GST Thumb Image
Karnataka Authority for Advance Ruling, in the application made by Mr. Anil Kumar Agarwal, has held that GST would not be payable on the remuneration paid to an executive director of a company as such engagement would be in the nature of employment.


One of the major concerns of companies since the introduction of Goods and Services Tax (GST) laws in India has been the taxability of remuneration paid by them to their directors.

Directors, based on their role and relationship with the company, can be categorised as:

  • executive directors,
  • non-executive directors, and
  • independent directors.

While all three categories of directors are considered agents and ‘trustees’ of a company, only executive directors additionally share an employer-employee relationship with the company.

Under GST laws, services rendered by an employee to an employer in the course of employment are not taxable. However, services provided by a director to a body corporate are treated as a taxable supply under GST laws, and is expressly recognized under notification no. 13/2017-Central Tax (Rate) dated 28 June 2017 (Notification). In terms of the Notification, the services provided by a director to a company are taxable on reverse charge basis i.e. the tax would be payable by the company, who is the recipient of the service.

Therefore, there is an apparent contradiction between the two sets of provisions of GST. The provisions seeking to tax services rendered by a director does not take cognizance of various types of directorship which exist in companies. Consequently, it purports to tax even such activities of directors that are carried out in the capacity of an employee of a company, which are otherwise not taxable.

Previously, taxpayers have approached the Authorities for Advance Ruling (AAR), in Karnataka in the case of M/s. Alcon Consulting Engineers (India) Pvt. Ltd., and in Rajasthan, in the case of M/s. Clay Craft India Pvt. Ltd., to obtain clarity on this issue. In both these rulings, the AAR failed to take into consideration the distinction between different types of directors and summarily held the remuneration being paid to the director to be taxable.

Karnataka AAR Ruling in Anil Kumar Agarwal

In the present ruling, the Karnataka AAR examined the capacity in which the director was receiving remuneration. The AAR noted that there could be two possible scenarios in relation to the remuneration being received by the applicant.

The first, is where the applicant is an executive director of the company. In this case, the applicant would be considered an employee of the company and the remuneration received by him in that capacity would not be included in the aggregate turnover for GST purposes.

The second possibility is where the applicant is a non-executive or independent director. In this case, the remuneration received by the director would be taxable in accordance with the Notification.

In the present case, the AAR observed that since the applicant had failed to provide documentation like appointment letter, employee state insurance details or provident fund deductions to evidence that the remuneration received by him was in the capacity of an employee, it was not possible to conclude the status of the applicant. However, the AAR recorded that the taxability of the remuneration would be guided by the two scenarios discussed by it.

Download PDF to read more

Subscribe to our Knowledge Repository

If you would like to receive content directly in your inbox from our knowledge repository, please complete this subscription form. This service is reserved for clients and eligible contacts.


    Under the rules of the Bar Council of India, Trilegal is prohibited from soliciting work or advertising in any form or manner. By accessing this website,, you acknowledge that:

    • You are seeking information about Trilegal of your own accord and there has been no form of solicitation, advertisement or inducement by Trilegal or its members.
    • This website should not be construed as providing legal advice for any purpose.
    • All information, content, and materials available on this website are for general informational purposes only.
    • Any information obtained or material downloaded from this website is completely at the user’s volition, and any transmission, receipt or use of this website is not intended to, and will not, create any lawyer-client relationship.
    • Information on this website may not constitute the most up-to-date legal or other information. Trilegal is not liable for the consequences of any action taken by any person based on any material or information available on this website, or for any inaccuracy in or exclusion of any information or interpretation thereof.
    • Readers of this website or recipients of content or information available on this website should not act based on any or all such content or information, and should always seek advice of competent legal counsel licensed to practice in the appropriate jurisdiction.
    • Third party links contained on this website re-directing users to such third-party websites should neither be construed as legal reference / legal advice, nor considered as referrals to, endorsements of, or affiliations with, any such third party website operators.
    • The communication platform provided on this website should not be used for exchange of any confidential, business or politically sensitive information.
    • The contents of this website are the intellectual property of Trilegal.

    We prioritize your privacy. Before proceeding, we encourage you to read our privacy policy, which outlines the below, and terms of use to understand how we handle your data:

    • The types of information we collect and why we collect them.
    • How we use your information to provide a personalized experience.
    • The measures we take to ensure the security of your data.
    • Your rights and choices in managing your personal information.
    • How we may share information with trusted partners for specific purpose.

    For more information, please read our terms of use and our privacy policy.

    Up arrow