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REVERSE CHARGE FOR DIRECTORS SERVICES

Service Tax - By: - Dr. Sanjiv Agarwal - Dated:- 1-10-2015 Last Replied Date:- 5-10-2015 - Service Tax is payable under reverse charge by the companies who receive services from their directors who are not in employment in terms of Rule 2(i)(d)(EE) of Service Tax Rules and Entry No. 5A of Notification No. 30/2012-ST dated 20.06.2012 (as amended by Notification No. 45 and 46/2012-ST dated 7.8.2012). Only individuals can become directors as per section 253 of the Companies Act, 1956, No body corpo .....

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ng government) who has either invested in the company or is otherwise authorized to nominate a director. When a director receives payment in his personal capacity, the same is liable to be taxed in the hands of the director. However, where the fee is charged by the entity appointing the director and is paid to such entity, the services shall be deemed to be supplied by such an entity and not by the individual director. In the case of Government nominees, the services shall be deemed to be provid .....

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rms of Notification No. 33/2012-ST dated 20.06.2012. Entire amount (100 per cent) of Service Tax shall be payable by the company under reverse charge mechanism. Companies shall have to register themselves under service tax before making payment of service tax on services provided by directors under reverse charge mechanism. Where a person is a director in more than one company, whether all the companies in which he/she is a director, though the service provider is the same person (non-employed d .....

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case, directors themselves shall be liable to discharge Service Tax liability. On a director requesting the company to pay Service Tax himself rather than the company paying under reverse charge mechanism, nobody stops him from requesting the company but the law, as it stands is very clear. Service Tax has to be paid by the person liable to pay in terms of section 68(1) and 68(2) and there cannot be any deviation from the statutory provisions. However, there have been instances where Tribunal ha .....

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nd balance by themselves, it was held that since the providers had categorically stated their liability and mentioned their service tax registration number, revenue was expected to call for details from the concerned authorities Department cannot shift the entire blame on the assessee. Having not done so, assessee could not be made liable to pay any service tax and demand was set aside. [Navyug Alloys Pvt. Ltd. v. CCE & C 2008 (8) TMI 100 - CESTAT AHEMDABAD followed]. W.e.f. 11.07.2014, dire .....

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Reply = The entire article des not discuss a most important aspect of remuneration by way of sitting fees paid / payable to directors for attending meetings of Board or meetings of committees. Sitting fees or commission on profits will be the only remuneration such non executive directors will be receiving. The 100% RCM will apply to payment of sitting fees / commission. And another factor important in this respect is to ensure that reimbursements are taken into account. Directors are normally .....

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B(44)) means an activity carried out by a person for another for consideration , and includes a declared service , but shall not include a provision of service by an employee to the employer in the course of or in relation to his employment. It is pertinent to note that the whole time directors, managing directors and executive directors are engaged in managing day to day functions of the company or the body corporate, therefore , they can be considered as employees of the company. Furthermore , .....

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