Service tax on sitting fees

DEAR MR.SHYAMAL MISTRY,

                                  IT DEPENDS ON THE AMOUNT OF SITTING FEES THE NON-EXECUTIVE DIRECTOR OR PART-TIME DIRECTOR IS DRAWING.  GIVEN THE CURRENT RULE, A NON-EXECUTIVE CANNOT DRAW MORE THAN 10K AS SITTING FEES WHERE THE TURNOVER IS LESS THAN 5LAKH. ANY AMOUNT WHICH IS LESS THAN 10 LAKH IS EXEMPTED FROM SERVICE TAX- YOU MAY CONSULT OTHER EXPERTS REGARDING THIS PROVISION.

REGARDS,

TANVEER MD MASOOD

Service provided by Managing and Whole-time Directors/ Executive Directors (those who are under employment with the Company) are governed by the exclusion clause contained in the definition of ‘service’ under Section 65B (44) (b) which provides that service provided by employees to their employers in the course of or in relation to employment are exempt from service tax.

Service provided by Part-time/ Expert/ Independent/ Nominee directors, etc., (those who are not under employment with Company), are in the nature of providing their professional/expert services to the company. Hence, the said Services would be chargeable to Service tax under Reverse charge by the Company w.e.f 07.08.2012.

For the purpose of charging of service tax on the sitting fees to a director, Threshold exemption limit does not apply and hence the company has to pay the service tax.

Thank you,

So, ultimately Service Tax will be paid by Company (Service Receiver) on the amount of sitting fees paid by the Company to the director.

Yes Service tax would be paid by the Service receiver ie Company on Directors sitting fees after 07.08.2012 vide Notification No. 30/2012  ST dated 20.06.2012

The Directors would be liable to pay Service Tax on the Service rendered by them from 01.07.2012 to 06.08.2012 except in cases where the Directors is not rendering any other taxable services and subject to the notication 33/2012 ST dated 20.06.2012 exemption of Rs. 10 lacs can be availed by them

As per the MCA Clarification, Sitting fees is paid only to the non executive directors. Nevertheless the Sitting fees is paid to executive directors then it will form part of over all remuneration to executive directors.

It is very important to note that only service provided "during the course of employement" is covered under negative list and not other professional service which may be provided by the executive directors to the company after getting approval of CG.

Accordingly, Sitting fees is the part of remuneration as per MCA clarification and paid during the course of employement and no service tax is applicable in this case. However, other professional service, if any, provided even by the executive directors shall be covered by reverse charge mechanism.

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