Service provided by Directors under partial reverse charge

[Guru Murthy]

Dear sir,

As per Notn No 45/2012-ST dated 07.08.2012 has amended the Not No 30/2012-ST dated 20.06.2012, the receipent of service has to pay service tax for the services rendered by the director. My query is that after payment of the Service tax, can the company avail cenvat credit ?

[JAMES PG]

It is available subject to the eligibility norms as per Cenvat Credit Rule

[Guru Murthy]

My Query is regarding that only. Whether service tax paid towards the services rendered by the director is eligible for cenvat credit or not? Can any body clarify it?

[JAMES PG]

As per Rule 2(l) of CCR, input service is defined as any service used by a provider of output service provider for providing an output service or used by a manufacturer, whether directly or indirectly in or in relation to the manufacture of final products and clerance of final products upto the place of removal and includes services used in relation to ( among other things) accounting, auditing, credit rating, share registry etc. Even though the word "such as" , " activities related to business" etc are removed from the definition of input services, the usage of the words " any" , " includes" etc enlarges the scope of definition. Holding of Board Meetings is statutory requirement under Companies Act and payment of fees to the Directors is also emanating from the same. Hence it is felt that there is no infirmity in availing credit of ST paid on the fees paid to the Directors of own Company

[Gajanand Verma]

Yes, the Company is entitled to avail the input of the Service tax paid on the directors remuneration on reverse charge basis. the service tax paid by the Company on directors remuneration will be considered as common services and will be eligible under Rule 6(3) of CCR, 2004 as per ratio of taxable and exempted services.

[Ramanujam Varadarajan]

Services provided by Directors are eligible input services for availing Cenvat credit.  But if the concern is involved in providing both taxable and exempted output services, then the credit will be restricted as per Rule 6 of CCR, 2004

[Guest]

Can anybody clarify what are the directors services to be included for service tax

[Ramanujam Varadarajan]

In respect of all the services provided by a director of a company to the company, the reverse charge service tax would apply on the company.  If the director is an employee of the company, the compensation paid will be treated as in the nature of employment and would not attract service tax.

[Guest]

What about the sitting fees and salary to directors.

AI Summary

Reverse charge on director services: company may claim cenvat credit subject to input service eligibility and apportionment. Notn No 45/2012-ST makes recipients liable to pay service tax on director-provided services under reverse charge; cenvat credit on such tax is available only if the services qualify as input service under the Cenvat Credit Rules and subject to the usual eligibility, documentation and apportionment restrictions where both taxable and exempt outputs are supplied. Remuneration constituting employment income is excluded from service tax and not creditable.