Service Tax on Directors Commission

[P S SATYA NARAYANA]

Please clarify, whether Directors need to pay service tax on commission they have received for the Financial year 2011/12 (prior to 1.7.2012),   in July 2012.

[YAGAY andSUN]

This matter should be dealt according to the following Circular, since it has not been superseeded as yet by the Department:-

Circular No. 115/09/2009 – ST  dated 31^st July 2009

[P S SATYA NARAYANA]

Thank you Mr.Pradeep. 

That means the payment of service tax on Directors Commission will apply only for the service they provide from 1st July 2012.  Mere receipt of commission payment in July 2012, for the service rendered in Financial year 2011/12 does not come under Service tax ambit.

[YAGAY andSUN]

No, there is no clear cut directions ushered from the Department in this regard but aforesaid Circular may be used as defence.

AI Summary

Service tax on directors' commission: taxability depends on when the service was performed, not merely on payment timing. Service tax on directors' commission is governed by the period when the service was provided rather than the date of payment; commissions received after the relevant charge date for services rendered earlier do not attract tax on that basis, and Circular No. 115/09/2009 ST may be relied upon as a defence in absence of contrary departmental guidance.