Reverse charge on rent paid to director

[JIGAR SHAH]

One of our clients had a service tax audit, in it, the service tax officer raised a query about rent paid to the director and applicability of reverse charge on the same. The rent so paid was less than the threshold limit of service tax, hence the director had not taken service taken registration. Now, is there any court pronouncement in the assessee's favour that can be later on used by us to appeal with the higher authorities, if there is any addition?

Also, is there any option to get that ITC back under service tax or use the benefit of the said reverse charge paid under GST?

[KASTURI SETHI]

Service provided by the Director of a Company to the said company or body corporate was brought under RCM vide Notification No.10/14-ST dated 10.7.14 (effective from 11.7.14) Para No.1(i)(b)(iva) amending notification no.30/12-ST dated 20.6.12.

Section 68(2) of the Finance Act, 1994 was excluded from Small Scale Service Exemption Notification No.33/12-ST dated 20.6.12 (para no.1(ii) refers.). Hence no threshold exemption available under RCM.

[KASTURI SETHI]

Also see Section 142 (11)(c) of CGST Act.

[JIGAR SHAH]

On the ground that the services are input service and since the ST paid under RCM, Cenvat Credit of the same is admissible under erstwhile CCR, 2004. As no cenvat can be availed now, Refund under transitional provision is to be granted?

AI Summary

Reverse charge on director-supplied services makes the recipient liable and may trigger input credit or transitional refund remedies. Reverse charge applies to services provided by a director to the company after a specific notification brought such services under RCM and excluded them from the small service provider threshold; the company is liable to discharge the tax. Payment of tax under RCM creates input tax credit rights under the erstwhile Cenvat regime, and where credit cannot be availed post-transition the payer may seek relief through transitional refund provisions.