SERVICES PROVIDED BY A DIRECTOR

[raj babu]

what will be the remedies available if the director has charged for his professional services in forward charge and company has not paid service tax on reverse charge mechanism. The director has paid all his laibility for service tax without claiming any cenvat credit.

[KASTURI SETHI]

As per notification no.45/12-ST, 100 % ST is to be paid by Service Receiver under RCM. This liability cannot be discharged by Service Provider. If it is done so, it is legally totally wrong. Now SR has to pay its Service Tax and Service Provider is to claim refund. Otherwise Service Receiver is to face the consequences in the form of interest and penalty. If you want to save penalty, pay due Service Tax on your own. Take remedial action quickly before it is pointed out by the department.

[DR.MARIAPPAN GOVINDARAJAN]

Whether the Director paid the service tax payable by the company on reverse charge basis?

[YAGAY and SUN]

In our view, Director needs to seek refund and the company needs to pay the tax under reverse charge mechanism.

The alternate view is that since the tax is paid to exchequer hence on the same transaction the tax cannot be demanded. It is a settled legal position.

[SHIVKUMAR SHARMA]

I agree with the view of YAGAY ANDSUN

[DR.MARIAPPAN GOVINDARAJAN]

If the tax is inadvertently paid like the present case refund can be got.

[Ganeshan Kalyani]

It would be revenue neutral in case the tax is paid by the service receiver and the provider claims the refund of the tax paid. In my view, the case is justifiable to the department. However the lower authority may not accept the neutrality and he will insist to corrective action as suggested by the learned colleague expert. But it has to be justified and fought.

AI Summary

Reverse charge liability: service receiver must pay tax under RCM; supplier should seek refund and receiver must regularise.
The service receiver is primarily liable under the Reverse Charge Mechanism and the supplier cannot discharge that liability by paying tax; where the supplier has paid tax mistakenly, the supplier should seek refund and the receiver must pay under RCM and regularise returns to avoid interest and penalty, though revenue neutrality arguments may be advanced and may require contestation.