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Service tax on directors remmuneration?

Krishna (STUDENT) (136 Points)

11 June 2013

Is Service Tax there on Directors Remmuneration?

If yes what sort of payments will that attarct?

Can any one send notification and logic for charging it?

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5 Replies

Deepak Gupta (CA Student) (15922 Points)
Replied 11 June 2013

Originally posted by : Krishna
	Is Service Tax there on Directors Remmuneration? If yes what sort of payments will that attarct? Can any one send notification and logic for charging it?

FAQs on Service tax on Remuneration to Directors

https://www.dateyvs.com/faqs-on-service-tax-on-remuneration-to-directors/

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Savan Somani (Corporate Manager) (478 Points)
Replied 11 June 2013

By: Savan Somani, Manager Taxation, Kamat Hotels (India) Limited

Note on Company liable to pay Service Tax on services received from its NED director

The requirement of reverse charge mechanism has been further expanded to cover payments made to Directors,

where the service tax needs to be paid by the company itself in totality.

The above amendments are effective from 07.08.2012.

Company liable to pay service tax on services received from its directors

Company receiving services from the directors are being brought into tax net as new Notification No. 45/2012-ST,

dated 7-8-2012 has clarified that in respect of services provided by the directors to company, liability to pay service

tax would be on the company under reverse charge. Companies would be required to pay service tax on gross

amount paid to directors.

All payments made by the company to directors would be covered by above reverse charge provisions including the

Reimbursement of Expenses Sitting Fees, Commission, Remuneration, connected to Board meeting etc, received by

the non executive Director are all liable to ST.

However it is mandatory for all NED Director to issue Invoice as now they are covered under the Service Tax Net

though currently they are not charging as per the Amendment.

Services provided by directors as employee in the course of employer- employee relationship would not be covered

by the said provision as employer-employee relationship activities are already excluded from the definition of

service itself under section 65B (44) of the Finance Act. For the period of July’12 Fees with ST need to be paid to

NED who are eligible for the Service Tax (The directors have to register and pay. If the value is less than 10 lakhs,

they can claim exemption)

If some NED has charged ST for the period of July’12 month also we have to pay the ST charged by them.

Normally, service tax is payable by the person who is providing the taxable service. In this budget a proviso has

been inserted wherein the Central Government can notify the specified services and the extent of service tax which

shall be payable such person and the remaining part of the service tax shall be paid by the service provider. In

other words, by insertion this proviso both the service recipient and the service provider together is required to pay the service tax.

In exercise of the powers conferred by sub-section (2) of section 68 of the Finance Act, 1994 (32 of 1994), the

Central Government, being satisfied that it is necessary in the public interest, hereby made the amendment in the

notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 30/2012-Service

Tax, dated the 20th June, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i),

vide number G.S.R. 472 (E), dated the 20th June, 2012, namely:- In the said notification,- (a) in para I, in clause

(A),- (i) after the sub-clause (iv), the following sub-clause shall be inserted, namely:- “(iva) provided or agreed to

be provided by a director of a company to the said company;”; (b) in para II, in the Table,- (i) after Sl. No. 5, the

following S. No. and entries shall be inserted, namely:-

Nature of service - Services by a director of a company to the said company

% of ST payable by service Provider -Nil

% of ST payable by service Recipient - 100%

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Janani Subramanian (Employed) (151 Points)
Replied 11 June 2013

The services done by the directors to the company would come under the reverse charge mechanism and since the service receipent is a company and the services are received by the company the comoany is only liable to pay service tax on remuneraation to directors.