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Service Tax on service provided by Director to the company

Service Tax - Started By: - Kunal Pawar - Dated:- 26-11-2015 Last Replied Date:- 2-12-2015 - If Director gives his premises on rent to the company and receives some consideration. Whether the Service Tax is payable by the company under Reverse Charge Mechanism being Service provided by Director to the company or whether Director has to pay Service Tax on the rent income under Renting of Immovable Property category? - Reply By Rajagopalan Ranganathan - The Reply = Sir, Renting of immovable proper .....

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y which is a commercial establishment and the same is used for commercial purpose then the rent payable is liable to service tax. Therefore whether service tax is leviable or not depends upon the clauses of the agreement entered into between the Director and the Company. As per Sl. No. 5 A of Notification No. 30/2012-ST dated 20.6.2012 (With effect from 1.74.2012) in respect of services provided or agreed to be provided by a director of a company or a body corporate to the said company or the bo .....

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dy corporate to the said company or a body corporate the service tax is payable by company under reverse charge on 100% ratio. However the nature of services should be provided or not to be provided under this category is not mentioned in the notification. Hence as above the service provided by a Director of a company by renting out premises to the said company the service tax on the service shall be paid by the company. - Reply By Mahir S - The Reply = Director will have to pay service tax on t .....

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h.Rajagopalan Ranganathan and replies dated 26.11.15 and 27.11.15 of Sh.Ganeshan Kalyani. - Reply By CA Akash Phophalia - The Reply = Since the reverse charge is applicable on the services provided by the director to the company or body corporate, therefore, I too am of the view that in this case, service tax is payable by the company under reverse charge. We are following this practice. - Reply By KASTURI SETHI - The Reply = Since another highly qualified person, namely, Sh.C.A.Akash Phophalia .....

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We feel elated. - Reply By Mahir S - The Reply = Just to inform the esteemed experts not to get too excited as I shall be posting my further reply tomorrow on the above topic and shall stand to my views expressed in my above reply dated 26.11.2015 . - Reply By Ganeshan Kalyani - The Reply = We welcome your views Sir. - Reply By KASTURI SETHI - The Reply = Sh.Mahir S Ji, If you have legal force in support of your contention, you are welcome. So I am open to accept your views if the same are in l .....

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employee, then the same are not liable to service tax.The Directors (generally whole time / managing / executive directors) who are under contractual employment with the company and receive salary or remuneration from the company will not be covered as they shall be considered as employees of the company.Therefore, in such cases, renting or premises shall also not be chargeable to service tax under reverse charge mechanism. Hence, the contention that service tax applicable on Directors is not c .....

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h condition of renting of premise by Director will not be available in the terms of contract between the Director and Company. Even otherwise, the company shall have to prove as to how such renting of premise can be termed as service being provided by Director to company.Therefore, in such cases, the services of providing premises on rent may not fall under the purview of payment of service tax under reverse charge mechanism.(3) The moot question in the query is regarding payment of service tax .....

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benefit in form of ESOPs etc. Company car/ travel reimbursementsHence, in above cases, the services are being provided by Directors in their capacity of a Director and therefore liable for payment of service tax by company under reverse charge mechanism.However, there are also various other services which are being provided by Directors to Company but such services do not fall in their capacity of a Director.The following amount/charges received by the Directors from the Company will not attrac .....

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on rent for company, shall not fall under the category of service being provided in the capacity of Director.Such services provided by Director are not services provided in their capacity of a Director but in their professional capacity. Therefore, company is not liable to pay service tax under reverse charge mechanism for such professional charges paid to Directors, such as rent paid to Director every month by the company for giving their premise on rent.Therefore, the company is liable to pay .....

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like to appreciate the reply submitted by Mahir sir. Further I would like to present my views as under: Serial no. 5A of Notification 30/2012 dated 20.06.2012, represents as ''in respect of services provided or agreed to be provided by a director of a company or a body corporate to the said company or the body corporate''. The proportionate of service tax payable by a Director is 'NIL' and the Company shall pay service tax on 100% ratio. Further as I already mentioned tha .....

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e condition of the notification is fulfilling the service is rightly covered under reverse charge mechanism and therefore service tax is payable by company or body corporate. Also, the motive behind renting of immovable property to a company is to support business by catering its need of want of immovable property for some business purpose. Otherwise there is no other motive of a Director to rent such property and earn from it. Thus it is logical to assume that the service provided by a Director .....

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not opposing you but we wish to brainwash ourselves with your precious views. Humble Regards!!CA Akash Phophalia 9799569294 - Reply By KASTURI SETHI - The Reply = I thought my friend Sh.Mahir S. would create a storm by his offbeat reply with legal backing (for which I was eagerly waiting for) but my dream has been shattered. Hence I fully support the views expressed in reply dated 1.12.2015 of Sh.Ganeshan Kalyani and in reply dated 1.12.2015 of Sh. Akash Phophalia C.A. The views expressed by Sh. .....

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