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Service tax reverse charge

ANSHUL AGARWAL (STUDENT) (141 Points)

09 August 2012

Suppose Mr. X recieves Rs. 2500000/- for providing a service to abc pvt ltd. on which service tax is to be paid by service reciever.

What will be the amount of service tax to be deposited by ABC Pvt ltd:

a) 2500000*12.36% i.e. 309000/-

b) 2500000/112.36*12.36% i.e. 275009/-

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17 Replies

DAYANANDA K N (ACCOUNTS EXCECUTIVE) (575 Points)
Replied 10 August 2012

It should be Rs.309000

Regards

Dayanadna

satya (Executive Excise) (1839 Points)
Replied 10 August 2012

Dear Anshul,

Service Tax portion only remit to the Govt directly from receipient not from the Service Provider.

mehul (ca final student) (83 Points)
Replied 10 August 2012

under reverse charge regime corporate entity have to pay service tax on amount paid + tds if any

it means gross amount paid.

RENGARAJ R.K (ADVOCATE) (7557 Points)
Replied 10 August 2012

Dear Mr Anshul,

I understand your query. Under reverse charge mechanism the service receiver has the obligation to pay service tax either partial or full. So for the amount of 25 lacs, if you could say the name of the service we can give you the exact liability of the service receiver.

ANSHUL AGARWAL (STUDENT) (141 Points)
Replied 10 August 2012

Mr. X is a full time director in the private ltd. co. and he is recieving director's remuneration from the co.

(Guest)

In this case 309000/- will be paid by the company as ST on directors remuneration.

mehul (ca final student) (83 Points)
Replied 10 August 2012

query : If it is full time director and if he is working as an employee of the company, then also reverse charge applicable ?

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 10 August 2012

No. As discussed elsewhere in this Forum, ST is not payable by the employer company while paying remuneration to WTD who is an employee.

Regards,

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(Guest)

Originally posted by : Dipjyoti Majumdar
	No. As discussed elsewhere in this Forum, ST is not payable by the employer company while paying remuneration to WTD who is an employee. Regards,

Correct, but what about payment made to directors who are not MD/ WTD ??

RENGARAJ R.K (ADVOCATE) (7557 Points)
Replied 10 August 2012

I agree with Mr Majumdar. Service tax will be applicable only to independent directors who are non-executive directors. Only they have to discharge the liability on sitting fees, commission etc.,

MD/ED/Wholtime directors are employees of the Company. In the case of Government directors and foreign directors of the company, it will be paid under reverse charge mechanism.

RENGARAJ R.K (ADVOCATE) (7557 Points)
Replied 10 August 2012

A new notification is issued. Please see the notn no.45/2012 dt 07.08.2012. Now payment to directors has been brought under reverse charge 100%. So, my previous opinion on independent directors liability will not hold good in view of the new notn released today.

CA sudhanshu (student) (79 Points)
Replied 10 August 2012

When a director receives payment in his personal capacity, the same is liable to be taxed in the hands of the director its does matter whether director is a md/wtd or not.

CA Sanjay Bag (CHARTERED ACCOUNTANT) (3340 Points)
Replied 11 August 2012

Originally posted by : DAYANANDA K N
	It should be Rs.309000 Regards Dayanadna

Yes, agreed with Mr.Dayanadna

RENGARAJ R.K (ADVOCATE) (7557 Points)
Replied 11 August 2012

Dear Mr Sidh CA,

Kindly read the new notification on the subject matter about payment to directors vide notn no.45/2012 & 46/2012 and offer your comments. Now the tax liability is shifted under reverse charge. Directors have no liability.

Moreover, if the relationship between two persons is of an employee and an employer, the activity performed by the employee to the employer is excluded from the definition of service. This applies to company to MD/ED/Wholetime directors. Kindly go thro the relevant provisions of the Act.

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