RCM Entry 6: Director Services, and the Line Between Salary and Fee

RCM Entry 6 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

A director can occupy three positions at once — employee, office-holder, and private individual dealing with the company. Entry 6 reaches only the middle one, and two circulars are what keep the other two out.

Entry 6 of Notification No. 13/2017-CT(Rate) covers "services supplied by a director of a company or a body corporate to the said company or the body corporate", with the company or body corporate located in the taxable territory liable. It must be read with paragraph 1 of Schedule III — services by an employee to the employer in the course of employment are neither goods nor services. Circular No. 140/10/2020-GST dated 10.06.2020 draws the operative line at the income-tax treatment: remuneration declared as salary and subjected to TDS under section 192 is outside GST; remuneration subjected to TDS under section 194J as professional or technical fees is inside Entry 6. Circular No. 201/13/2023-GST dated 01.08.2023 then takes services supplied in a private or personal capacity, such as renting immovable property, outside Entry 6 altogether.

The Schedule III overlay

Entry 6 on its face covers every service a director supplies to the company. Read alone it would catch a managing director's monthly salary.

Paragraph 1 of Schedule III prevents that: "Services by an employee to the employer in the course of or in relation to his employment" are treated as neither a supply of goods nor a supply of services. Where a director is an employee and the payment is salary in that employment, there is no supply, so there is nothing for Entry 6 to shift.

The Handbook states the residue crisply: GST under reverse charge is not applicable where the amount is paid as salary to the director under an employer-employee relationship and is subjected to TDS under section 192 of the Income-tax Act, 1961. "Except this, any amount paid, by whatever name called, shall be liable to GST under reverse charge."

Circular 140/10/2020: two questions, two answers

The circular addresses the two director populations separately.

Directors who are not employees

The circular reasons from the Companies Act, 2013:

• The definition of whole-time director in section 2(94) is an inclusive definition, so a whole-time director may be a person who is not an employee of the company.
• The definition of independent director in section 149(6), read with rule 12 of the Companies (Share Capital and Debentures) Rules, 2014, makes it clear that such a director must not have been an employee, proprietor or partner of the company in any of the three financial years immediately preceding the year of proposed appointment.

Conclusion: for directors who are not employees, the services supplied to the company for remuneration are "clearly outside the scope of Schedule III" and are therefore taxable under reverse charge — the tax is payable by the company.

Directors who are also employees

Here the circular applies the classic distinction between a contract of service and a contract for service. A director who has also taken employment "may be functioning in dual capacities" — as a director, and under a master-and-servant contractual relationship.

The circular's test is the company's own books and its TDS treatment:

• The part of the remuneration declared as salary in the books and subjected to TDS under section 192 is not taxable — it is consideration for services by an employee in the course of employment, within Schedule III.
• The part declared other than as salary and subjected to TDS under section 194J as fees for professional or technical services is "consideration for providing services which are outside the scope of Schedule III" and is therefore taxable under reverse charge.

This is unusually workable as tests go, because it uses a determination the company has already made for another statute, and one that is documented in Form 26AS and the TDS returns. It also means the GST position follows the payroll and TDS decision — so an inconsistent TDS classification carries a GST consequence.

Circular 201/13/2023: services in a personal capacity

The second circular answers a question the first left open. Where a director rents immovable property to the company, or otherwise deals with it as a private individual, is that a "service supplied by a director" within Entry 6?

On the 50th Council's recommendation (11.07.2023), the CBIC clarified that it is not. Services supplied by a director to the company or body corporate in his private or personal capacity — such as renting of immovable property to the company or body corporate — are not taxable under RCM.

Only those services supplied by a director "as or in the capacity of director" of that company or body corporate are taxable under Entry 6.

But the transaction does not vanish. The Handbook completes the analysis: a director's residential property let to a GST-registered company in personal capacity "does not fall under the ambit of entry 6 but will fall under entry 5AA", provided the conditions of that entry are satisfied. And a commercial property let by an unregistered director to a registered company falls under Entry 5AB since 10.10.2024. The three renting entries →

So the effect of Circular 201 is to move the transaction between entries, not out of tax.

Personal guarantees, and loans between related entities

Two further clarifications are recorded in the Handbook, and both go the taxpayer's way.

Personal guarantee by a director to a bank. Under Circular No. 204/16/2023-GST dated 27.10.2023, no GST is payable on the service of providing a personal guarantee by a director.

Loans between related entities. Under Circular No. 218/12/2024-GST dated 26.06.2024, services regarding the extension of loans between related entities, where the consideration is solely in the form of interest or discount, are fully exempt.

These matter because both are Schedule I candidates. A guarantee or an interest-free-ish facility between a director and his company, or between group companies, is a supply between related persons and would otherwise be valued and taxed without consideration. The circulars close that route.

What "director" and "body corporate" reach

Entry 6 speaks of a director of a company or a body corporate, so its span follows section 2(11) of the Companies Act, 2013 — which includes a company incorporated outside India but excludes a co-operative society.

A nominee director appointed by a lender, an investor or a promoter group is a director of the company for Entry 6 purposes; where the fee is paid to the nominating institution rather than to the individual, the arrangement should be examined on its own terms as a supply by that institution.

A designated partner of an LLP is not a director of a company or body corporate, so Entry 6 does not reach LLP designated partners' remuneration.

The compliance chain

Directors are commonly unregistered, which makes the mechanics familiar:

• Self-invoice under section 31(3)(f), and a payment voucher under section 31(3)(g);
• Time of supply under section 13(3) — earliest of payment entered in the books or debited to the bank, the day after sixty days from the director's invoice where the director is required to issue one, or the date of the recipient's own invoice where the recipient issues it;
• Payment in cash under rule 85(4), with credit available in the same month if otherwise eligible;
• Table 3.1(d) of GSTR-3B, credit in Table 4(A)(3), annually in Table 4G and Table 6C.

Sitting fees, commission on profits, consultancy retainers and professional fees to non-executive and independent directors are the everyday population of this entry.

Key takeaways

• Entry 6 reaches services supplied as or in the capacity of director — not everything a director is paid.
• Salary subjected to section 192 TDS is outside GST under Schedule III paragraph 1; amounts subjected to section 194J TDS are inside Entry 6 — Circular No. 140/10/2020-GST.
• Independent directors and non-employee whole-time directors are, by definition, not employees; their remuneration is taxable in the company's hands.
• Circular No. 201/13/2023-GST takes personal-capacity supplies, such as renting, out of Entry 6 — but they land in Entry 5AA or 5AB.
• No GST on a director's personal guarantee — Circular No. 204/16/2023-GST; loans between related entities for interest or discount are exempt — Circular No. 218/12/2024-GST.
• A designated partner of an LLP is not within Entry 6.

Read next

• RCM Entries 5A, 5AA and 5AB: Renting of Immovable Property
• RCM's Financial-Sector Entries: Insurance Agents, Recovery Agents, DSAs and Business Correspondents
• ITC on Reverse Charge Tax: Conditions, Timing and the ISD Route

Disclaimer: Positions stated as on 5 September 2026, based on entry 6 of Notification No. 13/2017-Central Tax (Rate), paragraph 1 of Schedule III to the CGST Act, 2017, sections 2(94) and 149(6) of the Companies Act, 2013 with rule 12 of the Companies (Share Capital and Debentures) Rules, 2014, and Circulars No. 140/10/2020-GST, 201/13/2023-GST, 204/16/2023-GST and 218/12/2024-GST, as reproduced in the ICAI Handbook on Reverse Charge under GST (2nd edition, February 2025).