Service tax on director's remuneration

 Service Tax is payable under reverse charge by the companies who receive services from their directors who are not in employment. All amounts paid as remuneration except salary to directors shall be liable to Service Tax, whether for attending board meetings or committee meetings or for any other service rendered in the capacity of a director. If an employed director gets sitting fee for attending the meeting, it may be liable to Service Tax as Department is likely to view it that way. There is need for clarification on this issue. However, the following amounts received by the directors from the company will not attractService Tax as such amounts does not represent service provided by directors – interest on loan by director to company, dividend on shares and other professional charges on account of services not rendered as a director (in professional capacity)

See we can categorise the directors in 2 ways

1) wholetime Directors/MD/Executive directors/full time directors engaged as employees

2)Part time directors/Non-Executive director

When we pay remuneration to the directors covered in category 1) then it is regarded as nevertheless Salary and hence TDS is deducted u/s 192 as TDS on Salary because they(directors) provide their services as the other employees of company do in normal circumstances.Thus service tax can not be leveid if TDS is done as TDS on Salary.

On the other hand, if payment is made to directors covered in category 2) above then it is regarded as providing services to the company concerned by the professional(director).In this case, directors render services in their professional capacity(not in the capacity of employees) and earn fees by way of sitting fees,commission or by way of any other name.Hence TDS is deducted u/s 194J @ 10% and not u/s 192.Thus, in this case services are provided to the company therefore service tax will be applicable.