Service Tax on Directors Remuneration under reverse charge

[deepak kalambate]

Dear Sir,

We have a employee director & we are paying salary to him. Department is asking us to pay service tax on this under reverse charge

Pl let us know is there Board's clarification on this.

Pl advise

Regards,

Deepak R Kalambate

[Sanjeet Kumar]

Dear Deepak 

As per Section 65B (44) service provided by an employee to his employer is not covered by the meaning of Services. So service provided by the director in capacity of employee is not liable to service tax. You should reply to department that your company is paying salary to director for their employee capacity not for their professional capacity to support this you can attach copy of resolution for appointment of WTdirector in employee capacity. 

I think you got my point. 

[deepak kalambate]

Thanks !

[PAWAN KUMAR]

Please read service tax Notn No 45/2012-ST dated 07.08.2012 wherein service provided by director of company is liable to service tax under reverse charge and in this case service tax is be paid fully by receiving company. There is no liability of service tax of the director.

 

 

[PAWAN KUMAR]

Dear Sir,

In earlier reply, i expressed the views for commission paid by the company to director, but in case the director acting as an employee, the services performed by him is not taxable as per clause 65B (44)(b).

 

[YAGAY andSUN]

whole time directors are exempted.  Companies having whole time directors are not liable to pay service tax under reverse charge mechanism.

 

[deepak kalambate]

Dear Sir,

Is there any case laws regarding the subject matter?

Thanks & Regards,

Deepak

[Sanjeet Kumar]

Dear Deepak, 

These are the latest Amendments and for judgement on this type of cases you have to wait around 10-15 yrs. 

there is simple logic if Director is whole time then not covered by ST.

if part time then company have to pay ST under reverse charge.

AI Summary

Service tax reverse charge on director services: companies liable when directors act other than as whole time employees. Taxability depends on the director's capacity: services by a director acting as an employee are excluded from 'services' and not taxable, supported by evidence of employee/whole time appointment; services by directors acting in a non employee, part time or professional capacity are taxable under the reverse charge mechanism, with the recipient company liable to pay service tax.