I am appointed as CFO on a contract basis (or Retainer) in the hospital instead of as an employee on a fixed monthly amount. Do I need to pay GST? What is the TDS rate and section under which the company should deduct taxes? Also, my attendance is marked. Am I eligible for 24 days of leave?
From India
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From India
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Understanding Employee vs. Retainer Status
It is understood that you are not a retainer but an employee only. Even though your employment is for a fixed term, you will be covered by all the rules and regulations concerning the employment of persons. A retainer is a person whose expert advice is taken as and when required. He will not regularly attend the office, but he visits the office only when his presence is required. He will never ask for leave and will never follow office timings. The fee paid is called a retainer fee, and that will come under the head of Professional fee. This is a service, and he can issue an invoice which may include GST. Since you have been allotted leaves, your status is not as a Consultant/Retainer but as an employee.
Tax Implications for Employees
The question of GST will not arise in your case because your relationship with the company is that of an employee and employer. Being an employee, your remuneration should be subjected to tax deduction at source under the head "Salaries" only. The TDS should be made as per section 192 and not under section 194J. Section 194J is applicable for professionals, whereas the former is applicable for employees. It's worth referring to Wockhardt Hospitals Limited vs. Department Of Income Tax, in which it was observed that the remuneration paid to doctors appointed as consultants was chargeable to tax under the head 'salaries' and liable for deduction of tax under section 192 of the Act, not under the provisions of section 194J of the Act.
From India, Kannur
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4526It is understood that you are not a retainer but an employee only. Even though your employment is for a fixed term, you will be covered by all the rules and regulations concerning the employment of persons. A retainer is a person whose expert advice is taken as and when required. He will not regularly attend the office, but he visits the office only when his presence is required. He will never ask for leave and will never follow office timings. The fee paid is called a retainer fee, and that will come under the head of Professional fee. This is a service, and he can issue an invoice which may include GST. Since you have been allotted leaves, your status is not as a Consultant/Retainer but as an employee.
Tax Implications for Employees
The question of GST will not arise in your case because your relationship with the company is that of an employee and employer. Being an employee, your remuneration should be subjected to tax deduction at source under the head "Salaries" only. The TDS should be made as per section 192 and not under section 194J. Section 194J is applicable for professionals, whereas the former is applicable for employees. It's worth referring to Wockhardt Hospitals Limited vs. Department Of Income Tax, in which it was observed that the remuneration paid to doctors appointed as consultants was chargeable to tax under the head 'salaries' and liable for deduction of tax under section 192 of the Act, not under the provisions of section 194J of the Act.
From India, Kannur
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I agree with the observations of Madhuji. No doubt it's a 'tenure' post with separate terms and conditions. However, as he is the CFO on a regular basis, requiring his attendance like any other employee, it's only appropriate to treat his status as an 'employee' drawing a salary. TDS will also be like a salary only. No GST is involved.
From India, Bangalore
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From India, Bangalore
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Hi, One small observation. The member who raised this question claims that he is appointed as a Chief Financial Officer (CFO) in a hospital. The question raised was very trivial, related to TDS and GST, which a person of his stature should be very familiar with. Looks strange!
Many employers follow the concept of a consultant retainer contract to avoid statutory requirements, and even the employees prefer the same as their take-home salary will be more compared to regular employment.
From India, Madras
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Many employers follow the concept of a consultant retainer contract to avoid statutory requirements, and even the employees prefer the same as their take-home salary will be more compared to regular employment.
From India, Madras
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Yes, being a person heading the Accounts/ Finance department, he should know the difference between employment and professional consultancy and deduction of tax as per section 192 and 194J etc.
From India, Kannur
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From India, Kannur
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Mr. Kaushal, it is indeed surprising that you are asking accounting questions on an HR platform when you are supposed to be a CFO. Is your question related to whether you are a contractor or an employee? If so, please ask the question more clearly.
Anyway, to answer your question, if you are raising an invoice with the employer every month, then you will have to register for GST and pay it if your 'turnover' from all engagements crosses ₹20 lakhs in a year (₹10 lakhs for 7 northern states). TDS will be deducted from your invoice by the employer at 10% as it will be classified as professional fees.
But if you are a CFO and do not know this, I would be worried for the employer...
From India, Mumbai
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Anyway, to answer your question, if you are raising an invoice with the employer every month, then you will have to register for GST and pay it if your 'turnover' from all engagements crosses ₹20 lakhs in a year (₹10 lakhs for 7 northern states). TDS will be deducted from your invoice by the employer at 10% as it will be classified as professional fees.
But if you are a CFO and do not know this, I would be worried for the employer...
From India, Mumbai
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Contract employee & Principal employer 2017.pdf
EMPLOYEE CONTRACT.docx