SERVICE TAX ON DIRECTORS REMUNERATION

[Mehul Pandya]

Greetings to all the Members,

As per Notification No. 45/2012 - Service Tax dated the 7^th August, 2012, Sr. No. 5A- in respect of services provided or agreed to be provided by a director of a company to the said company.(under RCM).

my query is - Will all the Directors fall under this or is it only for the Non – Executive Directors and the Independent Directors who are not the Employees of the Company, Kindly Explain, with any government order, if any.. Thanks.

AI Summary

Directors' remuneration under reverse charge: non executive and independent directors' fees attract service tax while employee directors are excluded.
Remuneration to non employee directors (non executive/independent) is subject to service tax under the reverse charge mechanism, whereas services by directors who are employees (Managing Director/Whole time Director) are excluded under Section 65B(44)(b). Employment status is determined by terms of appointment and indicators such as payroll, TDS deduction and ROC filings. If a director bills through a separate firm as an external service provider and the arrangement reflects an arm's length supply, the supplier may discharge the service tax rather than the company under reverse charge, subject to examination of the actual nature of services and potential conflict of interest.