Dear All!
Please guide me in the following issue.
While auditing I observed that my client has made a provision for incentive payable to Director for 2011-12.
The actual payment was made only in September 2012. I observed that the company has paid service tax on reverse charge basis in respect of the above incentive paid to Director. Is the company actually liable to pay service tax on reverse charge as per Point of Taxation Rules?
I don't think company is liable to make payment on reverse charge basis on director remuneration paid in Sept'12 for the F.Y 2011-12. Merely because payment made are made after 01.07.12 will not add any additional liability on the service reciver as service has been performed when it was not taxable.
Further to Nirav's comments, incentive paid to Executive / Managing/Wholetime Director would fall within the scope of managerial remuneration and hence outside the service tax net.
Because there is employer employee relationship. Only remuneration, in whatever form, paid to parttime directors/outside directors would attract service tax liability on reverse charge mechanism.
CAclubindia
