Director's salary exempt from GST: Karnataka AAR ruling
The salary of a director in a company is not liable to be
taxed under Goods and Services Tax (GST), the Karnataka Authority of Advanced
Rulings (AAR) has said. The ruling is set to stir up the controversial issue of
taxing incomes of directors or partners in a firm, since the Rajasthan bench of
AAR had ruled last month that the incomes were liable to be taxed. “The incomes
received towards salary/remuneration as a non-executive director of a private
limited company, renting of commercial property, residential property and the
values of amounts extended as deposits/loans/advances out of which interest is
being received are due to be included in the aggregate turnover for
registration,” the Karnataka AAR said in its Ruling on May 4.
This will create a adequate confusion among the taxpayers
having more than one Office in more than one states say for instance, Rajasthan
and Karnataka and this will emerge out as a big dilemma as to which AAR Ruling
need to be complied with.
In the absence of a Centralised AAR, there are contrary rulings
and several others in the past issued by AARs of other states on levying GST on
salary of directors is a reflection of the same.
The salary of a director in a company is not liable to be
taxed under Goods and Services Tax (GST), the Karnataka Authority of Advanced
Rulings (AAR) has said. The ruling is set to stir up the controversial issue of
taxing incomes of directors or partners in a firm, since the Rajasthan bench of
AAR had ruled last month that the incomes were liable to be taxed. “The incomes
received towards salary/remuneration as a non-executive director of a private
limited company, renting of commercial property, residential property and the
values of amounts extended as deposits/loans/advances out of which interest is
being received are due to be included in the aggregate turnover for
registration,” the Karnataka AAR said in its Ruling on May 4.
This will create a adequate confusion among the taxpayers
having more than one Office in more than one states say for instance, Rajasthan
and Karnataka and this will emerge out as a big dilemma as to which AAR Ruling
need to be complied with.
In the absence of a Centralised AAR, there are contrary rulings
and several others in the past issued by AARs of other states on levying GST on
salary of directors is a reflection of the same.
“Such contrary rulings create confusion amongst the industry
players and give more credence to the need of creation of a national appellate
authority for advance ruling,” said Rajat Bose, partner at Shardul Amarchand
Mangaldas & Co.
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