Is GST Applicable on Salary? Complete Guide (2026)
GST does not apply on salary. Salary paid by an employer to an employee is not a "supply of service" under the GST Act. The employer-employee relationship is specifically excluded from GST. This is one of the most searched GST questions in India.
Quick Reference
GST on Salary
NIL (Exempt)
Legal Basis
Schedule III, CGST Act
Director RCM
18% (non-executive)
Manpower Agency Fee
18% (on service fee)
Employee Benefits
Exempt
GST Rate
0% (Exempt)
N/A
Why Salary is Not Subject to GST
Schedule III of the CGST Act, 2017 specifically lists "services by an employee to an employer in the course of employment" as activities that are neither supply of goods nor supply of services. This means salary, wages, bonus, and perquisites are completely outside the scope of GST.
PF, ESI, Gratuity — Also Not Subject to GST
Employer contributions to Provident Fund (PF), Employee State Insurance (ESI), and gratuity payments are also not subject to GST — they are part of the employment relationship.
Director Remuneration — RCM Applies (Exception)
Remuneration paid to a non-executive/independent director (who is not an employee) is subject to 18% GST under Reverse Charge Mechanism. The company must pay this GST and can claim ITC on it.
Contract Labour and Manpower Services
If a company hires contract workers through a manpower agency, the agency charges 18% GST on the service fee (not the salary portion). The company can claim ITC on the service fee component.
Reimbursements to Employees
Reimbursements paid to employees (travel, accommodation) are also outside GST. However, if the company is billed directly for these expenses, the supplier charges GST to the company and ITC can be claimed.
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No. Salary income does not require GST registration. GST registration is required only if you provide taxable services or sell goods above the threshold limit.
It depends. If the director is an employee (executive director on payroll), no GST applies. If the director is a non-executive/independent director not on the payroll, the company must pay 18% GST under RCM.
Yes. A freelancer is not your employee, so their invoices attract 18% GST. Only the employer-employee relationship is exempt. Payments to freelancers, consultants, and contractors are subject to GST.
Yes. Manpower supply services provided by staffing agencies attract 18% GST. The client company can claim ITC on this.
