Company liable to pay service tax on services received from its Directors
Company liable to pay service tax on services received from its directors & Recipients of security services to discharge 75% of service tax liability
Company receiving services from the directors are being brought into tax net as new Notification No. 45/2012-ST, dated 7-8-2012 has clarified that in respect of services provided by the directors to company, liability to pay service tax would be on the company under reverse charge. Companies would be required to pay service tax on gross amount paid to directors. However, question arises whether all payments made by the company to directors would be covered by above reverse charge provisions.
In our view, services provided by directors as employee in the course of employer- employee relationship would not be covered by the said provision as employer-employee relationship activities are already excluded from the definition of service itself under section 65B (44) of the Finance Act.
Notification No. 45/2012-ST, dated 7-8-2012
In exercise of the powers conferred by sub-section (2) of section 68 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 30/2012-Service Tax, dated the 20th June, 2012, published in the Gazette of India, Extraordinary, Part II , Section 3, Sub-section (i), vide number G.S.R. 472 (E), dated the 20th June, 2012, namely:-
In the said notification,-
(a) in para I, in clause (A),-
(i) after the sub-clause (iv), the following sub-clause shall be inserted, namely :-
“(iva) provided or agreed to be provided by a director of a company to the said company;”;
(ii) in sub-clause (v), after the words “manpower for any purpose”, the words ” or security services” shall be inserted.
(b) in para II, in the Table,-
(i) after Sl. No. 5, the following S. No. and entries shall be inserted, namely:-
in respect of services provided or agreed to be provided by a director of a company to the said company
(ii) in Sl. No. 8, in the entries under the heading ‘Description of a service’, after the words “manpower for any purpose”, the words “or security services” shall be inserted.