Whether service tax leviable on remuneration paid to Directors in addition to salary

[samiuddin ansari]

Hello....Good evening Sir,

My friends Company engaged in manufacture of Ball and Bearing and accordingly registered with Central Excise. Now, CGST Audit people, at the time of conducting audit, raised an observation and demanded service tax on remuneration paid to all the Directors of the Company holding that the remuneration is not a salary since professional tax as per Gujarat Professional Tax Act, no professional tax had been deducted from the amount paid to them. Considering only such aspect, they raised an objection and instructed to pay with interest and penalty. Please throw light on such matter and guide as to whether service tax is leviable on such amount as this is not a commission or special charges or any kind fees paid to them.

AI Summary

Employee-employer relationship excludes directors' salary from service tax when remuneration is in the course of employment.
Whether service tax is payable on directors' remuneration depends on the nature of the director-company relationship: where a director is in an employee-employer relationship and remuneration is paid as salary, the definition of "service" (per Section 65B(44)(b)) excludes provision of service by an employee to the employer, so service tax is not chargeable. Non-payment of local professional tax does not by itself convert such payments into taxable services, and payroll features like TDS deductions support treatment as employment income.