Applicability of reverse charge mechanism of service tax

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This query is : Resolved

RAJESH (RKB) (Querist)

22 February 2014
As we know services provided by a Non-executive Director to the Company is covered under Reverse-charge Mechanism & the company has to pay Service tax on it.

Query:- A Chartered Accountant is providing services as a Non-executive Director in a company.
In this case whether the CA, acting as a professional have to pay Service tax.
Or The Company has to pay Service tax on the service received by it as Director Service, under reverse charge mechanism.

Nikhil Kaushik

Nikhil Kaushik (Expert)

22 February 2014 yes even in such cases reverse charge shall apply....

Message likes : 1 times

RAJESH (RKB)

RAJESH (RKB) (Querist)

24 February 2014 Thank U Nikhil Sir.

But in this case The CA(i.e, Director) is not an employee of the company. Than can he also issue a professional invoice by charging service tax thereon.

Nikhil Kaushik

Nikhil Kaushik (Expert)

24 February 2014 Dear Rajesh,

The directors except for executive directors are never the employee of the company and the reverse charge mechanism is applied on such directors only. If the Chartered Accountant, the company can use Mumbai CESTAT judgment in the case of Umasons Auto Compo Pvt. Ltd. Vs. Commissioner of Central Excise & Customs, Aurangabad Citation: 2014 - TIOL - 126 - CESTAT - MUM to avoid any tax liability under RCM.

however, I would still suggest that you follow RCM model only

CS SAJU PHILIP MANALEL

CS SAJU PHILIP MANALEL (Expert)

25 February 2014 I beg to defer. RCM will apply only with respect to any services provided by the director in his capacity as a director. in such cases the bill will reflect the same. On the other hand if the director is providing any service in his professional capacity as a CA and raises the bill as a CA, then no RCM should not be applied.

Nikhil Kaushik

Nikhil Kaushik (Expert)

26 February 2014 Saju, I totally agree friend. But the query is that CA is providing services as a non-executive director. the query doesn't mention "in addition to being a non-executive director." that you need to consider.

Where he is providing any service which is in addition to his directorship, definitely as you said RCM wont apply.

So though you do disagree, but on a ground which is not relevant to the query

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