SERVICE TAX UNDER REVERSE CHARGE MECHANISM

[SURYAKANT MITHBAVKAR]

We have paid remuneration to directors on monthly basis and all directors are registered with Registrar of Companies.

Further we have issued FORM 16 every year to them.

In view of the above, whether we have to deduct service tax on remeneration paid to directors under reverese charge mechanism or not necessary.

[MUKUND THAKKAR]

TDS is deducted under section 192 of the Income Tax Act, 1961 is not leviable to service tax as the said amount is received by the directors in lieu of their employment with the company

[YAGAY andSUN]

The amount on which TDS is deducted is nothing but would be treated as salary. Hence, no service tax would be applicable.

[Rajagopalan Ranganathan]

Sir,

According to Section 65 B (44) (b) of finance Act "service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include-

" a provision of service by an employee to the employer in the course of or in relation to his employment."

Since you are paying monthly remuneration to the directors they are employees of the company. Therefore any service rendered by such directors are by an employee to the employer and it is not a service. Hence no service tax is payable.

[DR.MARIAPPAN GOVINDARAJAN]

Since the director is a regular employee no service tax is payable under RCM.

[Ganeshan Kalyani]

Sir,

Reverse charge mechanism is not applicable in case of service provided by employee to the employer. Further, service tax under reverse charge is an additional liability to be borne by service recipient It cannot be deducted as like TDS. Thanks.

AI Summary

Employee remuneration exclusion: director salary paid as employment income does not attract reverse charge service tax liability. Remuneration paid to directors who are regular employees and receive TDS/Form 16 is treated as salary and falls within the employee-exclusion; such payments are not services for service tax purposes and therefore do not attract liability under the reverse charge mechanism. TDS obligations under income tax remain separate and reverse charge cannot be applied or collected like TDS from the payee.