Reverse charge of service tax

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Querist : Anonymous

Querist : Anonymous (Querist)

21 November 2012 Our co. is paying office rent to one of its director...and also co. is paying service tax on rent to department as service receiver and has file ST-3 as a service receiver under the category of 'Renting of Immovable Properties'...Is it right?

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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21 November 2012 You are liable for service tax under reverse charge but now there is no concept of category wise service tax.
Only one category "Services other than in negative list" is there.

Querist : Anonymous

Querist : Anonymous (Querist)

21 November 2012 Sir you are not getting my point...i know negative list has been introduced and now all services are taxable...but this is not my question...
I am asking whether rent is covered under reverse charge mechanism?

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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21 November 2012 yes.. it is also covered under reverse charge.
"Any Service provided by Director is covered under reverse charge"

Querist : Anonymous

Querist : Anonymous (Querist)

21 November 2012 thanks sir.....but our taxation manager has a given a different reason....he says that as our company is also providing services to other persons and is registered so the company is under obligation to pay service tax on other srvices also as a service receiver....i.e. we have to pay service tax on the service received besides services provided

Viral Vora

Viral Vora (Expert)
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21 November 2012 First of all it should be cleared that renting of immovable property is declared service under section 66E(a). Hence even though rent of immovable property is provided to director, it is directors responsibility to make payment of service tax and no reverse charge mechanism is applicable.

Besides, Any service provided by Director is covered under reverse charge. But here by renting the property director is not providing any service.

Hence i am of the opinion that you need not required to pay service tax under the category Renting Of Immovable Property for the said immovable property.

Querist : Anonymous

Querist : Anonymous (Querist)

21 November 2012 Mr. Viral Vora could you please explain why the director is not providing any service by renting an immovable poperty to company?

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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21 November 2012 If the Director is not providing the service then who is the service provider????

Querist : Anonymous

Querist : Anonymous (Querist)

22 November 2012 Mr. Amit now one more confusion arises....in my view services provided by director only in professional capacity is taxable not other than that....

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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22 July 2025 This is a classic and often debated question around reverse charge on rent paid to a director under Service Tax law (pre-GST era). Let me break down the key points and explain the nuances:

Situation:
Your company pays rent to one of its directors for office premises.

Your company is paying service tax on rent under reverse charge mechanism (RCM) and filing ST-3 as a service receiver under "Renting of Immovable Property."

You want to know if this is correct.

Key Points and Analysis:
1. Is Renting of Immovable Property a taxable service under Service Tax?
Yes, renting of immovable property (commercial or office space) is a declared service under Section 66E(a) of the Finance Act, 1994.

Service tax is payable on rent for commercial premises.

2. Who is the service provider?
The owner/landlord of the property providing the property on rent is the service provider.

Here, if the director owns the property and rents it to the company, the director is the service provider.

3. Does reverse charge apply here?
Under Service Tax rules (pre-GST), reverse charge applies when certain categories of services are received from unregistered persons or specific notified services.

Renting of immovable property does not normally attract reverse charge, except in some specific cases.

If the landlord (director) is registered, he should charge service tax on invoice, and company pays accordingly.

4. Is renting by director considered "service by director"?
The phrase "services provided by director" refers to services performed by a director in their professional capacity, such as consultancy or managerial services.

Merely renting immovable property owned by director is not considered a "service provided by director" in professional capacity.

Hence, rent paid to director is treated as renting service from landlord, not as a service by director personally.

5. Who should pay service tax under RCM?
Normally, renting of immovable property is subject to service tax on the service provider (landlord).

Reverse charge may apply if the landlord is unregistered or in notified cases (depends on the time and notifications).

But rent paid to a director is not a service rendered by the director in capacity of director, so reverse charge on "services by director" does not apply here.

Practical Conclusion:
Scenario Taxability / RCM Applicability
Rent paid by company to director who owns property Director is service provider; should charge tax if registered
Reverse charge on rent paid to director? No, reverse charge does not apply here as it is renting service, not director service
Service tax on other services by director (professional) Taxable and may attract reverse charge if applicable
Company providing other taxable services Company must pay service tax on outward supplies separately

Summary:
Your company should pay service tax to the director if he is registered.

Reverse charge does not apply on rent paid to director unless specific notification says so.

Services by director in professional capacity (consulting, etc.) are separate and may attract RCM.

The tax department may scrutinize if proper invoicing and payments are not done.

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