Director's remuneration

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CA Sourabh Goenka (Querist)
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14 August 2012 Pls clarify us regarding the service tax liability on director's remuneration as per the recent notification issued by the service tax department.

CA Nikhil Jhanwar

CA Nikhil Jhanwar (Expert)
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14 August 2012 Remuneration to Whole Time Directors is not taxable.
Remuneration to non-executive directors who are not employee of the company is taxable

SImple Check: If TDS is deducted under Sec 192A then no service tax. If TDS is deducted under Section 194J then service tax payable.

Further reverse charge mechanism applies. In that case whole of the service tax shall be paid by the company directly to the government.

RENGARAJ R.K

RENGARAJ R.K (Expert)
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14 August 2012 According to the notification, it says "in respect of services provided or agreed to be provided by a director of a company to the said company" so, now the liability is shifted to the Company under reverse charge with effect from 7th August.

Now the question is who are all covered? whether MD/ED/WTD (Whole time director) are included?

Though there is no clarity, in my opinion, only non-executive directors are covered in the said notn 45/2012.

CA Sourabh Goenka

CA Sourabh Goenka (Querist)
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15 August 2012 but sir how can say that it is applicable only on the non executive director because there is no clarity in that notification. It contains only the word director, that means all the directors should be included.

CA Suresh Jain

CA Suresh Jain (Expert)
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16 August 2012 Dear Sourabh,

The Law is very clear. Section 66B(44) defines the meaning of "service" and according to which a provision of service by an employee to the employer in the course of or in relation to his employment is not covered under the definition of the word service for the purpose of service tax.

The Directors who are employees of the Company and receiving any remuneration with respect to their service as an employee of the Company is not taxable under Service Tax.

The Company is liable to pay service tax on the amount paid by it to Directors not in their capacity as employee, as reverse charge mechanism

CA Suresh Jain

CA Suresh Jain (Expert)
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RENGARAJ R.K

RENGARAJ R.K (Expert)
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16 August 2012 Dear All,

Kindly see the Circular issued by Ministry of Corporate Affairs, vide General Circular No.24/2012 dt 09.08.2012 F.No.14/33/2012-CL VII. This circular clears all your doubts please. My reply coincides with the circular. Kindly go thro and reply.

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CA Sourabh Goenka

CA Sourabh Goenka (Querist)
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16 August 2012 Thank you very much Rengaraj sir and suresh sir. Circular no. given by rengaraj sir clears all doubt regarding the director's remuneration taxability under service tax.

Rengaraj sir Just give me one more favour. I have searched this circular on service tax website where I have not found this circular but found on the taxmann site by the help of the google.

So please tell me where from I can see this general circular directly where department publish it.

CA Sourabh Goenka

CA Sourabh Goenka (Querist)
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16 August 2012 Thanks to all. I think this query is resolved now. Sir I have found this circular on mca website.

CA Nikhil Jhanwar

CA Nikhil Jhanwar (Expert)
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16 August 2012 This Circular is issued by Ministry of Corporate Affairs and not by CBEC. Pls. go through mca.gov.in

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