Reverse charge mechanism

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Querist : Anonymous

Querist : Anonymous (Querist)

16 August 2013 To which company reverse charge mechanism on service provided by directors is applicable???

Ganeshbabu K

Ganeshbabu K (Expert)
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16 August 2013 1)Service tax is payable on services provided by non-executive, nominee and independent directors to the company w.e.f. 1-7-2012.

2)Service tax is not payable in case of Managing Director or wholetime director or executive director, if the director is in full time employment of the company.

Querist : Anonymous

Querist : Anonymous (Querist)

16 August 2013 is it applicable to all the company??

Ganeshbabu K

Ganeshbabu K (Expert)
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16 August 2013 You may ask Why there is no service tax in case of wholetime director in employment of company?

Answer is here as below,

1)Section 65B(44) of Finance Act, 1994 as introduced w.e.f. 1-7-2012 reads as follows – “Service” means any 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

****Thus, services provided by employee to employer have been excluded from the definition of ‘service’ itself.

Thanks & regards
Ganesh babu k

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Querist : Anonymous

Querist : Anonymous (Querist)

16 August 2013 is it applicable to all the company??

Ganeshbabu K

Ganeshbabu K (Expert)
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16 August 2013 1)As per rule 2(1)(d)(EE) of Service Tax Rules inserted w.e.f. 7-8-2012 and Notification No. 30/2012-ST dated 20-6-2012 amended w.e.f. 7-8-2012, company receiving the services of directors is liable to pay service tax under reverse charge mechanism.

Yes, applicable to all companies..

***And i guess below are your doubts..here is the answers

(A)The remuneration paid to the director is less than Rs 10 lakhs per annum. Is the company liable to pay service tax under reverse charge?

Ans.Proviso (ii) to Para 1 of the Notification No. 33/2012-ST dated 20-6-2012 which provides for exemption to small service providers having value of taxable service less than specified limit states that nothing in this notification shall apply to such value of taxable services in respect of which service tax shall be paid by such person and in such manner as specified under sub-section (2) of section 68 of the said Finance Act read with Service Tax Rules,1994.

Thus threshold exemption of ` ten lakhs is not applicable in cases where the service receiver is liable to pay service tax under reverse charge method, as per provisions of section 68(2) read with rule 2(d) of Service Tax Rules..

In short, company will still be liable to pay service tax.

***Our company is a small company. Our total value of taxable services including remuneration paid to non-executive directors is less than Rs 10 lakhs per annum. Is the company liable to pay service tax?

As stated above, the provisions relating to exemption available to small service provider are not applicable when service tax is payable by service receiver under reverse charge. Hence, the company would still be liable to pay service tax.

Thanks & regards
Ganesh babu k

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Querist : Anonymous

Querist : Anonymous (Querist)

16 August 2013 if any company pay Rs.100000 to directors then also reverse charge mechanism is applicable??? if not then from which amount it is applicable????

Ganeshbabu K

Ganeshbabu K (Expert)
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16 August 2013 service tax Applicabe from the rupee 1,,

hope you have read above written content

Querist : Anonymous

Querist : Anonymous (Querist)

16 August 2013 thank you so much

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