Service tax on Directors' sitting fees

[Srivatsan Krishnamachari]

Dear Learned Friends,

As per Notification No:45/2012 Serial No:5 A services provided or agreed to be provided by a

director of a company to that said company is taxable under reverse charge mechanism (100%) Further vide Notification No:10/2014 another line is inserted 'in respect of services provided or agreed to be provided by a director of a company or body corporate to the said company or body corporate'

Obviously whole time directors of a company drawing their salary do not come under the purview of these notifications. It is also a practice generally found, particularly so in case of private limited companies that such whole time directors are paid 'sitting fees' also while attending the board meeting apart from their salaries and perks.Do these 'sitting fees' attract service tax under RCM. Kindly clarify.

Regards,

K.Srivatsan

AI Summary

Debate on Taxability of Directors' Sitting Fees Under Reverse Charge Mechanism: Contract of Service vs. Contract for Service The discussion focuses on whether directors' sitting fees are subject to service tax under the reverse charge mechanism (RCM). According to Notification No:45/2012 and Notification No:10/2014, services by directors to a company are taxable under RCM. However, whole-time directors receiving salaries are generally exempt. Participants debated whether sitting fees for such directors should attract service tax. It was clarified that if the director's role is considered a 'contract of service,' sitting fees are not taxable. Conversely, if it's a 'contract for service,' service tax applies. The distinction between these contracts is crucial, as highlighted by Supreme Court rulings and CBEC Circular No:115/09/2009.