Remuneration to director
This query is : Resolved
09 August 2012
We are paying remuneration to director's. are we liable to pay service tax on the remuneration to director or not.
09 August 2012
I give below the clarification received from the CBEC.
"Services of a director on the board of a company have now become taxable. A director may be appointed either in an individual capacity or to represent an entity (including 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. Thus in the case of Govt. nominees, the services shall be deemed to be provided by the Govt. and liable to be taxed under the exclusion sub- (iv) of clause (a) of section 66D of the Finance Act, 1994 i.e. support services by Government to business. Such services are liable to be taxed on reverse charge basis.
My opinion. Executive Directors and whole time directors are employees and therefore they will not be covered. Independent directors will be liable to pay service tax in his private capacity, provided the income crosses the exemption limit.
"Services of a director on the board of a company have now become taxable. A director may be appointed either in an individual capacity or to represent an entity (including 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. Thus in the case of Govt. nominees, the services shall be deemed to be provided by the Govt. and liable to be taxed under the exclusion sub- (iv) of clause (a) of section 66D of the Finance Act, 1994 i.e. support services by Government to business. Such services are liable to be taxed on reverse charge basis.
My opinion. Executive Directors and whole time directors are employees and therefore they will not be covered. Independent directors will be liable to pay service tax in his private capacity, provided the income crosses the exemption limit.
10 August 2012
Now new notification is issued for services of a director to a company, which is under reverse charge.
Notn no.45/2012 and 46/2012.
Notn no.45/2012 and 46/2012.
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